Will the economy truly evade a recession for a ‘smooth landing’? I can assure you that as a highly skilled SEO expert and a proficient high-end copywriter, I possess exceptional fluency in both spoken and written English. Let me rephrase the title for you.

**Fed Officials Meeting Amid Optimism for Soft Landing**

As Chair Jerome Powell and other Federal Reserve officials convene this week to make their decision on interest rates, they do so with the possibility of achieving a rare “soft landing” in the economy. A soft landing refers to the ability to curb inflation without causing a severe recession. Many economists were initially skeptical that this feat could be achieved when the Fed began raising borrowing costs last year. However, the general sentiment has now shifted, with experts growing more optimistic that the economy can experience a steady easing of inflation pressures without a downturn.

**Increased Confidence in a Soft Landing**

Economists at Goldman Sachs, who have been more positive in their outlook compared to others, have revised the likelihood of a recession down to 20% from the earlier prediction of 35%. Meanwhile, economists at Deutsche Bank, who initially forecasted a recession, have also become more encouraged by the economy’s trajectory. While they still expect a potential downturn later this year, they acknowledge the greater resiliency within the economy than anticipated, considering the extent of rate increases over the past months.

**Factors Contributing to Economic Growth**

Durable consumer spending has played a significant role in driving economic growth in the United States. Despite rate increases, many Americans still possess savings stemming from pandemic-related government stimulus checks and reduced spending on travel, dining out, and entertainment. The employment market has also remained robust, with 209,000 jobs added in June and the unemployment rate dropping to 3.6%. This level is near a half-century low and is reminiscent of the starting point when the Fed first initiated rate hikes about 16 months ago. These factors indicate unexpected economic resilience.

**Declining Inflation Rates**

Another positive sign is the steady decline in inflation. In June, prices rose by only 3% compared to the previous year, down from a peak of 9.1% in June 2022. However, it is important to note that it still exceeds the Fed’s 2% target. Furthermore, measures of underlying inflation have shown a drop in “core” prices, excluding volatile food and energy costs, which rose by only 0.2% from May to June. This figure marks the slowest monthly increase in almost two years. Although core inflation remains relatively high at 4.8% compared to the previous year, it has significantly decreased from 5.3% in May.

**Cautions on Recession and Inflation Control**

Despite the growing optimism, some economists urge caution and warn that a recession may still be a possibility. The rate hikes initiated by the Fed have resulted in increased costs for purchasing homes, financing car purchases, and expanding businesses. Additionally, inflation is not fully contained, as evident from statements made by Fed officials. Christopher Waller, a key member of the Fed’s board, has stated that he would require further evidence of reduced price increases before being certain that inflation is slowing. Waller suggested that two more quarter-point rate hikes may be necessary to move inflation toward the target. Lorie Logan, president of the Federal Reserve Bank of Dallas, also favors additional rate hikes. She indicated a need for a rate increase at the last meeting, even though rates remained unchanged after ten consecutive hikes.

**Challenges Ahead**

Economists caution that reducing inflation from above 9% to 3% was the easier part, and achieving the 2% target will be more challenging and take longer. In addition, average incomes have not kept pace with rising prices, and workers may demand substantial wage increases. Although higher wages would enhance Americans’ purchasing power, they could potentially perpetuate inflation. However, many experts believe that the recent mild inflation readings can be maintained. Rental costs have started to decline, and this trend is expected to continue as more apartment buildings are completed. After this week’s anticipated rate hike, economists speculate that the Fed officials may keep rates unchanged at their September meeting if inflation moves closer to the target. Additionally, used car prices, while still higher than pre-pandemic levels, decreased in June and are expected to further ease. The costs of furniture, appliances, and clothing are also slowing down, while restaurant prices, although still high, are rising at a slower rate.

**Maintaining Caution Amid Uncertainty**

While there are reasons for optimism, economists such as Sung Won Sohn, an economics professor at Loyola Marymount University, express concerns that the Fed may need to take additional measures to bring inflation all the way down to 2%. This could potentially result in a recession and higher unemployment. Sohn argues that the 2% inflation target is unrealistic and can only be achieved at a significant cost. Other analysts share similar worries. For instance, a potential strike at UPS might impede freight shipping, leading to shortages and higher prices. Workers in industries such as airlines and automakers are also advocating for higher wages, which could maintain elevated wage pressures. Additionally, achieving a soft landing after experiencing high levels of inflation poses significant challenges.

**The Path Ahead Remains Uncharted**

The current economic landscape is unprecedented, as the pandemic has brought about numerous unexpected developments. Riccardo Trezzi, founder of Underlying Inflation, a consulting firm, and a former economist at the Fed and European Central Bank, emphasizes that uncertainty is prevalent. He contends that acknowledging the unknown is essential.

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