US Fed on quest for unicorn of monetary policy: the soft landing

Heather Scott, Agence France-Presse

<div class="embed-wrap"><figure data-feedback="fb:likes,fb:comments"><img src="http://sa.kapamilya.com/absnews/abscbnnews/media/2018/news/12/08/fed.jpg"/><figcaption>Federal Reserve Board Chairman Jerome Powell speaks at his news conference after the 2-day meeting of the Federal Open Market Committee (FOMC) on interest rate policy in Washington, US, June 13, 2018. Yuri Gripas, Reuters/File</figcaption></figure></div>WASHINGTON -- The US central bank is on a quest for a mythical goal: keeping steady economic growth without allowing inflation to catch fire.This so-called soft-landing is the unicorn of central banking, rarely if ever seen.The Federal Reserve&#x27;s job might seem simple: the economy is closing in on the longest period of growth in recorded history, with unemployment at the lowest in nearly 50 years and inflation right on target at two percent.By those measures the Fed can declare victory. Full employment and stable inflation are the goals that Congress set for the central bank.But the wild ride on US stock markets in recent weeks, and in particular the past 4 days, show the challenge for central bankers in an environment where President Donald Trump can change economic policy and shake business confidence with each tweet.Economic data have started to flash early warning signs and anxiety among businesses is amplified by Trump&#x27;s use of uncertainty as a negotiating tool while he pursues a confrontational trade policy, targeted at allies and adversaries alike -- but in particular against China.The Fed&#x27;s role is a balance between cheerleader, therapist and sheriff for financial markets.And lately senior officials, including Fed Chairman Jerome Powell, have had to change their messaging to calm jittery investors: signaling it might slow the pace of increases in the key lending rate.The US stock market took another dive on Friday, with losses of more than two percent, or close to 600 points for the Dow.<div>STRONG ECONOMY -- BUT HOW LONG</div>The critical employment report on Friday gave a mixed message about the state of the economy. Job gains slowed to 155,000 last month, lower than expected and well below the 209,000 monthly average of the last 12 months.That slowdown, possibly reflecting the lingering effects of the hurricanes in the prior 2 months, is in keeping with an economy hitting its peak.&quot;Signs of a maturing, but still robust labor market,&quot; Greg Daco of Oxford Economics said of the report, echoing the view of other analysts.But the data also showed wages continued to rise and were 3.1 percent higher than a year earlier, outpacing inflation.And the Business Roundtable&#x27;s quarterly survey released Friday showed that while chief executives remained confident about the economy, they cited labor as the primary cost pressure their companies face.That same sentiment has been reflected in the Institute of Supply Management&#x27;s surveys of the manufacturing and services sectors, as well as the Fed&#x27;s &quot;beige book&quot; national survey, showing widespread labor shortages and increasing reports of wage and price increases in many industries as a result.Rising wages always make the Fed sit up and take notice since this feeds into inflation.Tight labor markets have even caused some companies to delay projects but the primary risk businesses see -- including 82 percent of those in the Business Roundtable survey -- is tariffs.Trump has imposed steep tariffs on imported steel and aluminum, and on $250 billion in goods from China, raising costs, notably in the auto sector, which has seen major job cut announcements, and delaying expansion and investment plans.<div>A FED PAUSE</div>The key challenge for the Fed effort to achieve a soft landing will be to address the contrary forces of rising price pressures and a slowing economy.Although Trump announced a 90-day tariff truce with China&#x27;s President Xi Jinping, doubts about the timeline and likely policy outcomes have increased fears that the US economy could slow and even contract in the next 2 years, sending investors scurrying for cover this week.Powell has presided over 3 rate increases this year, and a fourth is widely expected in December and the Fed has for months has repeatedly said it intends to continual gradual increases.But from one speech to the next in recent weeks, Powell changed his tune amid the pessimistic market reaction, changing gears from highlighting the strength of the economy and the plan for continued rate increases, to stressing that the finish line is close.And the most direct sign of the central bank&#x27;s intentions came Thursday when The Wall Street Journal reported the Fed was &quot;considering whether to signal a new wait-and-see approach&quot; since &quot;they are becoming less sure how fast they will need to act or how far they will need to go, and they want to assess how the economy is holding up under moves they have already made.&quot;Fed governor Lael Brainard said Friday the gradual rate increase strategy had worked well and remained &quot;appropriate in the near term.&quot; But she stressed that as the focus on sustaining the expansion as the outlook evolves &quot;we&#x27;ll make adjustments to the path of policy.&quot;<div> © Agence France-Presse</div>

The Federal Reserve's job might seem simple: the economy is closing in on the longest period of growth in recorded history, with unemployment at the lowest in nearly 50 years and inflation right on target at two percent.

The Federal Reserve's job might seem simple: the economy is closing in on the longest period of growth in recorded history, with unemployment at the lowest in nearly 50 years and inflation right on target at two percent.

US Fed on quest for unicorn of monetary policy: the soft landing | ABS-CBN

Halalan 2025

Entertainment

News

Metro.Style

Lifestyle

Sports

More

Traffic

Horoscope

Business

US Fed on quest for unicorn of monetary policy: the soft landing

US Fed on quest for unicorn of monetary policy: the soft landing

Heather Scott,

Agence France-Presse

Published Dec 08, 2018 08:26 AM PHT

Read More:

US

US economy

Federal Reserve

interest rates

ABS-CBN is the leading media and entertainment company in the Philippines, offering quality content across TV, radio, digital, and film. Committed to public service and promoting Filipino values, ABS-CBN continues to inspire and connect audiences worldwide.

Corporate

Investors

Governance

International Distribution

Corporate

Governance

Investors

International Distribution

NPC Seal of Registration

Privacy Policy

AI Policy

Terms of Service

Advertise with Us

© 2025 ABS-CBN Corporation. All Rights Reserved.

NPC Seal of Registration

Privacy Policy

Terms of Service

AI Policy

Advertise with Us

© 2025 ABS-CBN Corporation. All Rights Reserved.

NPC Seal of Registration

Privacy Policy

Terms of Service

AI Policy

Advertise with Us

© 2025 ABS-CBN Corporation. All Rights Reserved.