Michelle ThompsonPresident Joe Biden’s chief economic advisor, Lael Brainard, is growing increasingly optimistic that the American economy will avoid the recession that many had previously anticipated.
“Recent data certainly provide further evidence that the margin for a smooth economic transition has significantly expanded,” Brainard, who heads the National Economic Council, informed reporters on Friday.
Achieving a “soft landing,” which means curbing inflation without pushing the economy into a recession, is a challenging task. The Federal Reserve has managed to accomplish this feat only once in the past six decades, according to most assessments, although some research suggests they have achieved it more frequently.
While Lael Brainard, formerly the second-ranking official at the Federal Reserve, did not definitively rule out the possibility of a recession, she cited several indicators – such as moderating inflation, increasing real wages, declining interest rates, and a growing labor force – to support her argument that the prospects for a soft landing are becoming more favorable.
Lael Brainard acknowledged that there are always risks, including geopolitical ones, to consider. She highlighted that just a year ago, many economists believed that a recession was unavoidable.
She stated, “Most individuals may not consider what the alternative scenario could have been. However, it’s evident that forecasters had clearly predicted what they expected a year ago, and in some cases, those expectations came close to a near certainty of significant job losses and a recession as necessary measures to achieve the current state of inflation.”
The markets are celebrating or showing signs of enthusiasm.
Wall Street is experiencing a surge in positive sentiment as the Federal Reserve hints at its intention to initiate interest rate reductions, potentially as early as March. On Wednesday, the Dow Jones Industrial Average reached an unprecedented milestone, surpassing the 37,000 mark for the first time in history.
When asked about the White House’s perspective on the record highs for the Dow, Lael Brainard indicated that investors seem to be aligning more with the Biden administration’s positive outlook.
“Market participants are increasingly expressing a more optimistic outlook for the economy in the coming year, and we certainly appreciate that,” Brainard mentioned, highlighting the decline in market interest rates and the easing of mortgage rates.
However, she acknowledged that there is still much work to be done, stating, “We have a lot of work to do, and there are specific areas where Americans are still grappling with significant affordability challenges.”
