Tame inflation —-> “soft landing”?
by New Deal democrat
Tame inflation —-> “soft landing”?
I have a new post up at Seeking Alpha.
So long as inflation remains tame, the Fed has scope to bring about a “soft landing” to the slowdown, without there necessarily being a recession (so long as the Toddler in the White House doesn’t tip over the whole apple cart).
As usual, clicking over and reading puts a penny or two in my pocket.
you say: “So long as “core” inflation did not get too high relative to recent history, the Fed was able – in 1984, 1994, and 1996 – to lower interest rates after having raised them, without inflation getting out of control, and without a recession.”
but there were no cuts in 1994 and a single cut from 5.5 to 5.25 does not seem enough to warrant citing.
Am I missing something?
When real corporate profits fall too far down, it doesn’t matter what the Fed does. This is just the nature of the cycle. Demand runs itself and out. Considering real corporate profits look to be down 20% by first quarter of 2020, that is not a good sign for the business cycle in 2020. Once real profits decline 25%, head counts will be cut and spending will decline. Maybe the final death rattle will hold off until 2021, but it will be close in that regard.
Matter of fact, dispersion of job growth already shows a very late business cycle rate over the US. with the north slowing down to very little job growth and west/California still “booming” despite demand not really being there from a investment pov. Next phase is likely this 4th quarter when hiring is culled out west, triggering a blow out in corporate junk spreads. Most of decisions for the following year are made in the 4th quarter of previous year. California is obviously huge in this. When it rolls over, so will national data.