US economy achieves soft landing, but inflation concerns remain

  • The Fed successfully lowered inflation without triggering a recession.
  • Inflation concerns and political changes could influence the future of the US economy.

Eulerpool News·

The economy of the United States was able to benefit in 2024 from a rare economic phenomenon: a soft economic landing, orchestrated by the Federal Reserve. Under the leadership of Jerome Powell, the central bank managed to reduce inflation with increased interest rates without triggering a recession. Although unemployment rose, it remained within limits, and the economy proved to be surprisingly robust. This enabled the Fed to lower interest rates again for the first time in over four years. Jerome Powell expressed great satisfaction with the results at his last press conference of the year. "We clearly avoided a recession," he stated, highlighting that the economic descent proceeded better than many had predicted. Despite the positive developments, inflation remains the dominant theme for the coming year. Although a key inflation indicator for the Fed is significantly below the 2022 peak, it still exceeds the target mark of 2% and shows no signs of further decline. In the near future, changes in the political landscape, such as the inauguration of President Donald Trump next year, provide additional topics for discussion among economists. His planned course in trade and immigration could further fuel inflation and complicate the Fed's monetary easing measures. Powell stated at the December 18 press conference that the path to reducing inflation requires more progress before further interest rate cuts could be considered. Caution is advised, and the Fed members reaffirmed this by reducing the forecast for interest rate cuts in 2025 from four to two adjustments. With high expectations, the markets entered the year 2024, speculating on a total of six interest rate cuts starting in March. However, the inflation that had significantly cooled in the second half of 2023 returned in the first quarter. Despite the challenges, the Fed indicates that a cautious approach remains key in uncertain circumstances. "It's common sense to slow down when the path is uncertain," Powell concluded.
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