CNBC
- The US economy will likely avoid a recession or even a slowdown as inflation cools, according to Ed Yardeni.
- "I'm not in the recession camp. I'm in the soft landing camp now and I'm wondering whether it should be in the no landing camp," Yardeni told CNBC.
- Many analysts and market commentators have predicted a recession this year following a surge in interest rates.
The outlook for the US economy is cheerier than Wall Street would have you believe, and the country will likely avoid a recession or even a slowdown this year as inflation continues to cool, according to Ed Yardeni.
Speaking to CNBC, the president of Yardeni Research suggested that the world's largest economy may even dodge a so-called "soft landing" - a mild economic downturn - as the Federal Reserve pushes ahead with its efforts to rein in consumer-price pressures.
"I'm not in the recession camp. I'm in the soft landing camp now and I'm wondering whether it should be in the no landing camp," Yardeni told CNBC.
Experts have been debating whether the US will experience this year a hard landing, where interest-rate rises hit the labor market and drag the economy into a deep slump, or a soft landing where a recession is avoided but growth slows and jobs see a slight knock.
But Yardeni's comments on "no landing" suggest the economy could avoid both scenarios and carry on largely uninterrupted while the Fed fights to bring inflation down to its 2% target. It's a sentiment that has helped markets post decent gains this year.
The Fed has raised its target interest rate by 450 basis points in the past year to between 4.5% and 4.75%, and has signaled more increases in borrowing costs. Annual consumer-price inflation came in 6.4% for January, declining for the seventh straight month.
Yardeni though pointed to the consumption deflator as a better indicator of price pressures, which he said was likely to fall between 3% and 4% without a recession.
He added that he could see disinflation in goods, while he thinks services inflation will moderate alongside transportation prices, which are linked to energy.
Meanwhile, the US labor market has stayed resilient, adding 517,000 jobs in January, giving more credence to the economy's apparent ability to stave off the contractionary effects of rate hikes.
Yardeni thinks the Fed's benchmark policy rate will begin to come down next year, falling to 4.1% in 2024 and 3.1% in 2025, but doesn't expect any cuts this year.