Economic growth data says we’re on track for a soft landing
Minutes from the latest FOMC meeting reflect that officials are on hold until inflation trends much lower
Chicago Federal Reserve President Austan Goolsbee | Federalreserve/"FOMC_01302024_redacted_9703″ (CC license)
This is a segment from the Forward Guidance newsletter. To read full editions, subscribe.
I wrote yesterday about how the market has generally remained pretty resilient despite recent bouts of volatility.
Tariff concerns, geopolitical tensions, earnings season and inflation have all weighed on US equities at different points throughout 2025, but one tailwind has remained constant: economic growth is — at least for now — solid enough.
Some economic data points are looking really strong. Manufacturing is on the rise with the most recent ISM manufacturing PMI and the Empire State Manufacturing Survey both coming in better than expected.
January’s ISM services PMI came in a bit lower than December’s figure, but is still healthily above 50. Retail sales saw their expected January dip, but are also still in a Goldilocks range.
On the labor front, non-farm payrolls were up solidly, and initial jobless claims ticked up only slightly in recent weeks. Unemployment has stabilized and wage growth has started to moderate. Our labor market is, as Powell said, “solid.”
The Conference Board projects real US GDP to come in at 2.3% in 2025, a decline from 2.8% in 2024. Globally, the non-profit expects real GDP to show 3% growth for 2025.
“While the US economy is set to start 2025 on strong footing after a year of surprisingly robust growth, a combination of proposed policies will likely weigh on growth and leave inflation elevated as the year progresses, resulting in a more patient policy stance from the Fed,” The Conference Board wrote in a statement earlier this month.
So, what does all of this mean? I think it means the Fed just may be on track to achieve its coveted soft landing — that is if the data continues to reflect decent economic growth.
Chicago Fed President Austan Goolsbee said a few weeks ago he’s still “optimistic” about a soft landing.
Minutes from the FOMC’s most recent meeting (released today) show staff have concerns about the direction of federal policy.
They “continued to note elevated uncertainty regarding the scope, timing and potential economic effects of possible changes to trade, immigration, fiscal and regulatory policies,” the minutes read.
Trade and immigration specifically could impact progress being made on inflation reduction, some staff noted.
Several participants also said it could be appropriate to pause or slow balance sheet runoff until Congress reaches a debt ceiling resolution.
It sounds like the pause on interest rate cuts will continue in the near term, unless there are significant changes to economic conditions.
“If labor market conditions deteriorated, economic activity faltered or inflation returned to 2% more quickly than anticipated,” committee members would consider easing monetary policy.
Generally, the minutes reflect what we’ve known since Powell’s last press conference: Officials are on hold until inflation trends much lower.
The economic data situation however remains the same. And again, unless we see major declines in growth, a soft landing is not out of the question.
Get the news in your inbox. Explore Blockworks newsletters:
- Blockworks Daily: Unpacking crypto and the markets.
- Empire: Crypto news and analysis to start your day.
- Forward Guidance: The intersection of crypto, macro and policy.
- 0xResearch: Alpha directly in your inbox.
- Lightspeed: All things Solana.
- The Drop: Apps, games, memes and more.
- Supply Shock: Bitcoin, bitcoin, bitcoin.
