From the New York Times:
“Inflation slowed more sharply than expected in November, an encouraging sign for both Federal Reserve officials and consumers that 18 months of rapid and unrelenting price increases are beginning to meaningfully abate.
“The new data is unlikely to alter the Fed’s plan to raise interest rates by another half point at the conclusion of its two-day meeting on Wednesday. But the moderation in inflation, which affected used cars, some types of food and airline tickets, caused investors to speculate that the Fed could pursue a less aggressive policy path next year — potentially increasing the chances of a ‘soft landing,’ or one in which the economy slows gradually and without a painful recession.”
In his analysis, John Cassidy of The New Yorker writes:
“The inflation news isn’t all reassuring. At 7.1 per cent, the headline rate is still far above the Fed’s target of two per cent, which means that Jerome Powell and his colleagues are virtually certain to raise the federal funds rate by another half percentage point on Wednesday. (They have already signalled this move.) And the prices of some individual items remain greatly elevated. The price of fuel oil went up 1.7 per cent in November; compared with twelve months earlier, it was up sixty-five per cent. The price of food – purchased at home and in restaurants – rose another 0.5 per cent. During the previous twelve months, it increased by more than ten per cent.
“The recent rises in food prices came despite the fact that some key inputs to the food industry – including corn, wheat, and certain types of energy – have experienced substantial price drops in recent months. If these cost reductions aren’t soon reflected in supermarkets and takeout places, Americans will have good reason to be angry – and to suspect that big food companies are padding their profits at the expense of their customers. I doubt that the owner of my corner deli, who faces a lot of competition, is doing that. I’m pretty sure he’s merely passing along his increased costs. All the same, I’d be as relieved as anybody else to see the price of milk come down. But it’s also important to look at the over-all inflation picture, which is slowly but steadily improving. Rather than overcorrecting for its failure to predict the earlier price spike, the Fed should be mindful of this as it decides how to set policy in 2023.”
KC’s View:
I think I speak for everyone when I say, “Soft Landing = Good.”
And maybe I’m just a cockeyed optimist, but for some reason I’m thinking this is what is going to happen.
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