Fed Pursues Elusive 'Soft Landing' in 2024 as Inflation Eases But Rate Cut Timing Debated
• The Federal Reserve is trying to defeat inflation without causing a recession, known as a "soft landing." Inflation slowed in 2023 while unemployment stayed low and spending continued.
• The Fed has signaled it intends to cut interest rates in 2024 to provide relief from high borrowing costs, but the timing and pace of cuts is debated.
• Markets expect more rate cuts starting sooner than the Fed has projected, pricing in cuts potentially beginning in March rather than later in 2024.
• Lower Treasury yields could mean fewer rate cuts or delays if financial conditions ease too much and risk higher inflation again.
• A soft landing means avoiding a recession as inflation nears 2%. Price increases retreated in 2023 without significant economic weakness, but resilience may be needed in 2024 too.