Why This Landing Won’t Be Coming in Straight or Pain-Free
The data now look better for soft, while the gut-check remains braced for hard.
A stabilized approach is key to a successful landing.
Photograph: Bloomberg
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The market has stopped making sense. Data released Thursday reinforced something many were not too surprised about: That the US economy grew faster than forecast into the end of 2022. Gross domestic product increased at a 2.9% annualized rate in the final three months of last year after a 3.2% gain in the third quarter. In great news for the Federal Reserve, annualized quarter-on-quarter personal consumption expenditure inflation decelerated to 3.9%, from 4.7%. There were signs of slowing underlying demand as well, and that made it even better as far as the markets were concerned. To judge by Bloomberg’s measures derived from the fed funds futures market, the latest numbers did nothing to change the near certainty that the Fed will hike by only 25 basis points next week. Nothing counteracted the positive messages from unemployment and inflation data earlier in the month: