Fed's Strategic Waiting Game: Preventing Recession at All Costs

The Federal Reserve is playing a waiting game as it tries to avoid a recession, with economists predicting that the US will escape a downturn but not until well into 2024. Fed Chair Jerome Powell expects the central bank to navigate a path where the economy expands with inflation rates falling back to the 2% target, but the task is challenging. The Fed is cautious about acting aggressively against price pressures, as it could result in rebounding inflation or tip the economy into recession due to the lagged effects of previous tightening. The path to a soft landing is uncertain, and it may take at least two quarters to have a clearer picture. The Fed's policy-setting group forecasts inflation hitting its 2% target soon after 2025, but the contours of a moderate economy with stable prices would be evident in the incoming data by later next year or the following. The committee is estimating higher interest rates for longer, with a rate of 4.6% at the end of next year.