Biden’s top economist bets on soft landing as recession fears fade
By Matt Egan, CNN
New York (CNN) — President Joe Biden’s top economic adviser sounds increasingly confident that the American economy will avoid the recession that so many had penciled in for 2023.
“Recent data certainly give more evidence that the width of the runway for a soft landing has gotten much bigger,” Lael Brainard, director of the National Economic Council, told reporters on Friday.
Squashing inflation without throwing the economy into recession is what’s called a “soft landing.” It’s something the Federal Reserve has only achieved once in the past 60 years, at least by most metrics. (Some research argues the central bank has done it more often.)
Brainard, previously the No. 2 official at the Federal Reserve, stopped short of outright saying a recession is not in the cards. But she pointed to a variety of metrics – cooling inflation, rising real wages, easing interest rates and a growing supply of workers – to make the case that a soft landing looks increasingly likely.
“Of course, there are always risks. There will always be risks. Right now, we can see geopolitical risks and there could be other risks,” Brainard said.
The White House official noted that, just a year ago, many economists thought a recession was inevitable.
“Most people don’t think about what the alternative could have been,” Brainard said. “But obviously, forecasters did put out very clearly what they anticipated a year ago, and it was very close to 100% odds, in some cases, that there would be major job losses and a recession in order to get inflation to where it is today.”
Markets are rejoicing
Wall Street is celebrating as the Federal Reserve signals it’s preparing to start lowering interest rates, perhaps as soon as March. The Dow Jones Industrial Average catapulted above the 37,000 level on Wednesday for the first time ever.
Asked about the White House’s view of the record highs for the Dow, Brainard suggested investors are coming around to the Biden administration’s optimistic view.
“Market participants are reflecting a much more positive view about what the economy is likely to look like over the course of the next year. And we of course welcome that,” Brainard said, noting that market interest rates have dropped and mortgage rates have eased.
Still, Brainard conceded the job is not done.
“We have a lot of work to do,” she said. “There are certain areas where Americans continue to see really challenging affordability.”
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