Your Evening Briefing: The Fed Makes Progress on a ‘Soft Landing’ Plan

When it comes to bringing down inflation, the US Federal Reserve is like an A380 pilot on approach in a tricky crosswind, the runway fence lined with plane spotters (Wall Street and the commentariat) predicting disaster. Indeed, it’s way too early to tell whether the central bank will accomplish a mythical “soft landing” for the economy. But Fed Chair Jerome Powell and his colleagues have been quietly setting the stage for one. Their monetary tightening campaign is having a major impact in deflating asset bubbles that swelled during the first years of the pandemic. The cryptocurrency market—once valued at $3 trillion—has shrunk by more than two-thirds; Investor-favored technology stocks have tumbled by more than 50%; Red-hot housing prices are falling for the first time in 10 years. And most importantly, all of this is occurring without upending the financial system. “It’s astonishing,” said former Fed governor Jeremy Stein. “If you told any one of us a year ago, ‘we’re going to have a bunch of 75 basis-point hikes,’ you’d have said, ‘Are you nuts? You’re going to blow up the financial system.’” But it hasn’t happened yet.

Elon Musk’s self-inflicted calamity at Twitter, where he’s fired more than half of the employees, may be claiming another victim—the company that made him rich. Tesla is facing increasingly urgent issues and testing the faith of Musk’s remaining fans. Weakening demand in China is forcing the electric-vehicle maker to slow production and delay hiring at its Shanghai factory. Its top executive for that market has been called in to help out at its newest plant, in Texas, which isn’t ramping up as planned. And Tesla’s stock, which has lost more than $500 billion in market value this year, is under renewed pressure as Musk’s advisers weigh using the billionaire’s shares as collateral for new loans to replace Twitter debt.