A sobering column from Greg Ip in the Wall Street Journal:
Inflation has peaked. The Fed’s tightening has accomplished its mission. Strong labor market and consumer fundamentals will keep any recession mild.
These are among the story lines providing a tailwind to stocks in recent weeks. They feed hopes the Federal Reserve has achieved a soft landing: bringing inflation down to 2% without pushing up unemployment or tipping the economy into recession.
A reality check is in order. A soft landing is certainly possible, but these story lines look more like wishful thinking than a tough-minded appraisal of the Fed’s task. Let’s review.