The problem with the soft landing

Can you take care of inflation without causing a recession?

Last year the soft landing went from being a meme to being the dominant narrative for mainstream media analysts.

How did that happen? Inflation is down from its peak. And the US economy is doing ok. That's how things look like on the surface.

The problem is things aren't that easy. The soft landing actually looks more like a dead end.

Here is why.

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The problem with the soft landing

The takeaway

Inflation being down from its peak doesn't mean it is under control. Inflation will be under control when it will transition back to the pre-COVID level.

It is hard to get at the same time a growing economy driven by strong consumer spending and a regime change for inflation. 

You have to pick your poison:

• Consumption drops and the US economy slows down.

• Consumers continue spending and inflation stays high.

The soft landing is when you get the best of both worlds. But that doesn't seem compatible with reality.

Now despite the retail sales numbers of January, the US isn't in a recession yet. But without at least a slow down I don't really see how the inflation problem can get resolved.

You can't have everything