by John Rubino
Policymakers are trying to achieve a benign economic outcome, a soft landing similar to 1995. But unfortunately, history shows that soft landings are rare. Since 1960, there have been three soft landings but nine recessions. Soft landings happen when the Fed acts early and often, and recessions occur when the Fed acts late. Unfortunately, the Fed is late, very late today.
One of the biggest challenges for the Federal Reserve is that it confronts the most significant inflation cycle in decades without any trusted policy gauges. Decades ago, policymakers abandoned the monetary targets, arguing that they no longer provided a consistent and reliable nominal spending and inflation signal. And a few years ago, Fed Chair Powell “retired” the Phillips Curve from a policy gauge, arguing that there was no consistent pattern between labor market slack and up and down movements in inflation for the past two decades.