US Economy Defies Odds with Faster Growth, Avoiding Feared Recession
• The US economy grew faster than expected in Q4 2023, avoiding recession despite high inflation and interest rates.
• Consumers were buffered by excess pandemic savings, allowing spending to continue even as real wages declined.
• As savings depleted, real wage growth returned in 2023, allowing the "soft landing" narrative to play out.
• Inflation fell rapidly back to the Fed's 2% target by Q4, allowing room for interest rates to stabilize without crashing growth.
• The Fed should start pivoting to a neutral policy stance to avoid slowing the economy too much, given policy works with a 6-12 month lag.