Is an Economic ‘Soft Landing’ Coming to the U.S. in 2025? | Global News Avenue

Can price pressures return to normal in 2025 without a sharp rise in unemployment? If they do, it could mean “soft landingInvestors and economists have been paying attention.

Over the past two years, the Fed has struggled to curb inflation and cool the economy without tipping it into recession. recession. Although the central bank missed its annual target 2% inflation target In 2024, the unemployment rate is indeed under control and the economy continues to grow. Some economists still hope for a soft landing in the new year.

Ashish Shah, chief investment officer for public investments at Goldman Sachs Asset Management, said: “We continue to believe that we are in a soft landing phase and that U.S. economic growth will remain resilient into 2025.”

Tracking opportunities for soft landings

Economists focus on inflation, labor markets, Gross Domestic Product (GDP) and other economic indicators, awaiting a soft landing.

Taking into account third-quarter data, the likelihood of a soft landing increased by two percentage points from the last estimate to 42%, according to Wells Fargo calculations. At the same time, the probability of a recession has dropped by the same amount, to 28%.

Their research also explored another possibility: stagflationwhere inflation rises with unemployment. The likelihood of this happening is lower than the likelihood of a recession.

Inflation still needs to come down. What if not?

The Fed needs to slow price pressures in 2025 to achieve a soft landing. Some forecasts suggest inflationary risks from President-elect Donald Trump’s policies could exacerbate already stubborn inflation.

“Tariffs could create headwinds for economic growth next year and prevent inflation from returning to the Fed’s target,” a group of analysts led by Wells Fargo chief economist Jay Bryson said in a note. ”

Despite stubborn inflation, many economists believe economic growth will remain strong and the Fed will Keep interest rates hightariffs may increase prices. This may result in a situation where landing is impossible at all.

“The U.S. economy may not land next year but just refuel,” BMO senior economist Sal Guatieri wrote.

What about a recession?

A soft landing is rare for the Fed. Analysis by Piper Sandler shows that eight of the past nine Fed rate hikes have been followed by a recession. However, this time, a recession not a result Most economists think it’s possible.

“Our suite of recession models show that three- and six-month recession probabilities are the lowest in more than two years,” wrote Matthew Martin, senior U.S. economist at Oxford Economics.

However, economic uncertainty, particularly about the impact of tariffs, could mean growth is lower than expected.

“A hard landing or recession is not our base case, but the risk of such a scenario rises if global trade is severely disrupted,” Wells Fargo wrote.