What is a ‘no landing’ scenario? The latest buzzword that’s ‘all about inflation’
The notion of a no-landing scenario for the US economy – as opposed to a hard or soft landing – is the latest theme dominating discussions among economists and strategists.
So what is it? As the video above explains, a “no landing” scenario involves the economy continuing to grow despite the Federal Reserve’s efforts to contain inflation by raising interest rates.
And what does that mean for investors and consumers?
“It’s all about inflation,” Jim Bianco, president of Bianco Research, told Yahoo Finance Live.
“What they want or hope for, both in the Fed and on the street, is that the inflation rate will hit 2%,” he explained. “Well, the only way to do that – or so it is believed – is for the economy to slow down. And if it doesn’t slow down, inflation will remain high. And if inflation stays high, the Fed will keep hiking.”
Given the implication that the Fed will keep raising rates until inflation eases – and the economy cools in turn – some observers argue that there is no such thing as a “no-landing” scenario.
“Because we’re in this highly volatile environment, and because there’s so much uncertainty, we’ve now seen a number of different ways to interpret or call what we’re seeing in the economy,” said Gregory Daco, chief economist at EY Parthenon Yahoo Finance this week.
“No landing doesn’t make sense because it essentially means the economy keeps expanding, and it’s part of an ongoing business cycle, not an event — it’s just continued growth,” Daco added. “Doesn’t that mean the Fed needs to keep raising rates and doesn’t that increase the risk of a hard landing?”
Quibbles aside about the exact usage of the term, pundits seem to be in general agreement that recent data suggests the Fed may have to hike rates more than previously forecast.
As Torsten Slok, chief economist at Apollo Global Management, noted in a new note on Saturday: “The incoming data shows that we remain firmly in the no-landing scenario, where the Fed needs to hike rates more to keep the economy moving slow down and get inflation under control.” (Disclosure: Apollo Global Management owns Yahoo.)
Here’s the full interview with Bianco:
Michael is Sales Director at Yahoo Finance. Follow him on Twitter @MichaelBKelley.
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