Thu, February 06, 2025

The Economy Will Experience a Soft Landing in 2023

united States economy

Last week, the Federal Reserve increased interest rates by 0.50 percentage points, bringing the target range from 4.25% to 4.5%.

The most recent action was in a string of rate increases intended to stop inflation. Although rate increases will ideally bring inflation under control, they could also cause the economy to sputter to the point where a recession occurs. Averting a recession, which is a prolonged period of economic decline and frequently characterized by significant job losses, high unemployment, and pervasive financial hardship, would entail a “soft landing.”

Additionally, there are signs that inflation is decreasing and the dollar is weakening, both of which are indications that the Fed’s policy is, on the whole, effective.

But that doesn’t necessarily mean the economy is out of the woods. Despite being lower than October, year-over-year inflation was still high at 7.1% in November.

Consumers may eventually find themselves in a bind due to rising borrowing costs and prices.

Beijing earlier this year set an unambitious GDP growth target. With a 5.5% growth rate, China’s 2022 GDP target was the lowest in the previous three decades. The total number of working hours also decreased. Moreover, local government budgets were squeezed by the costs associated with mass testing, and widespread factory closures disrupted supply chains and increased worker unrest.

Businesses, analysts, and investors were seeking indications from Beijing authorities that there were plans to reopen the economy and relax pandemic restrictions. Simply hearing about a zero-covid easing at the time caused market rallies worth hundreds of billions of dollars.

The London-based macroeconomic data provider surveyed more than 2,300 sales managers between December 1 and 16. It discovered that their general level of business confidence was at its lowest since the monthly survey’s inception in 2013. From 51.821 in November to 48.125 in December, the index experienced a significant decline.

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