Fed Report Outlines Best to Worst Case Economic Scenarios, Soft Landing Most Likely But Bumpy Road Possible
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Baseline scenario is a soft landing Avoid recession, but growth below potential and inflation falls towards 2% target. Best for markets.
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Upside scenario is no landing Growth remains above potential, inflation falls less than expected. Bad for markets as rates stay higher longer.
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Downside scenario is bumpy landing Short, shallow recession that brings inflation down faster. Earlier rate cuts.
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Severe recession possible but unlikely barring new large shock like energy price spike or geopolitical event.
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China already experiencing bumpy landing. Growth below 4% next 3 years without reforms, but may stabilize above 4% with some stimulus.