Former Fed Chairman Bernanke: The Fed is expected to give the US economy a “soft landing” | Anue Juheng – International Political Economy

Bernanke, the former chairman of the US Federal Reserve, said that as long as inflation pressures on the supply side ease, the US economy has a chance for a “soft landing.”

Bernanke said on Sunday (12th) that the current US economy is mixed, and the economy may fall into recession. Economists have been making recession forecasts lately, but he sees a high chance of a soft landing for the Fed.

Under Bernanke’s scenario, the worst U.S. inflation drop in 40 years would be seen, with no recession or only a mild recession. He expects supply chains to improve and oil and food prices to stabilize or fall. He also noted that a loss of confidence in the Fed could lead to a tougher response from policymakers.

Bernanke pointed to a strong U.S. labor market as an important factor, and as long as the supply side improves, the Fed has the opportunity to bring down inflation without the costs of the early 1980s.

Goldman Sachs economists have also previously said that the U.S. economy remains on a narrow path to a soft landing. The improving inflation data and other factors suggest the Fed may be able to pull through its aggressive rate hike plan without tipping the U.S. into recession.

Many economists see the prospect of a near-term contraction averted by a strong job market and persistent cash surpluses on household balance sheets.

Still, all eyes are on the pace of the Fed’s rate hikes and whether the central bank can effectively strike a balance to help avoid a recession.

Economists at Goldman Sachs said they would not change their current forecast for the terminal funds rate of 3-3.25% and that the Fed could raise rates by 50 basis points at each of its next two meetings.


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