UA economist sees ‘soft landing’ for economy as a strong possibility

Mervin Jebaraj, economist with the University of Arkansas Walton College of Business, offers a gymnastics analogy for the Federal Reserve Bank’s handling of the tumultuous economy.

Observers have wondered if the aggressive hike in interest rates could pull inflation under control without crashing the economy and causing a recession. Jebaraj said, so far, it’s been a pretty well-done routine.

“As far as a ‘soft landing’ goes, I think you can safely say that the Federal Reserve has stuck a ‘soft landing’ in 2023. Now if you ever watch those gymnastics, you can get like one to two extra steps before you steady yourself, so that’s where we are and heading into 2024,” he said.

Inflation readings have fallen from the 10% range to the 3% range over the past year, still off from the Fed’s goal of inflation in the 2% range. Job creation, unemployment, and consumer spending have remained steady during the interest rate hikes and the national economy has shown resiliency as GDP remains strong.

Jebaraj said consensus estimates suggest a recession is unlikely in 2024 though it remains on the table. A group he participates in – the National Association for Business Economics – predicts a less than 50% chance of recession next year.

“We’ve certainly beat the expectations that most people had going back to last year, summer of last year in 2022 and the expectations that most people had through the first part of this year and as the data has come in through the second part of this year,” he said. “Overall, we expect some slowing in the economy without us going into a recession, and I think that’s where we are right now.”

You can watch Jebaraj’s full interview in the video below.