A soft landing won’t mean the economy is safe

SINCE we gave up on the idea that high inflation would be transitory, the hope has been that we would manage a soft landing: Inflation would melt back to 2 per cent without doing too much harm to the labour market or economic growth.

That’s what the Federal Reserve has predicted for months, even as economists warned it was extremely unlikely. Now it seems a soft landing is a real possibility. Inflation is falling, and the labour market remains strong with unemployment at a 50-year low and wage growth of 4.6 per cent.

If these trends continue, the “immaculate disinflation” the Fed projected will become a reality. But don’t celebrate yet. That won’t mean we dodged a bullet.