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Recession Still Forecast, But Soft Landing Almost As Likely? (3/4)

The minutes' overview of the economic landscape through the Open Market Desk's survey and review of market indicators ("market participants appeared to interpret incoming data as signaling, on balance, more resilience in economic activity than previously assumed") was echoed through the staff projections and most of the FOMC participants discussion in painting a picture of a resilient economy, with recession and banking sector risks fading, implying upside inflation concerns.
  • Recession Averted? The staff's economic projections suggested a more resilient economy than they had previously expected, though "uncertainty around the baseline projection was considerable and still viewed the risks as being influenced importantly by the potential macroeconomic implications of banking-sector developments, which could end up being more, or less, negative than assumed in the baseline."
  • While a recession (Q4 2023 to Q1 2024) remains their base case given the "effects of the expected further tightening in bank credit conditions amid already tight financial conditions" they "saw the possibility of the economy continuing to grow slowly and avoiding a downturn as almost as likely as the mild‑recession baseline." That suggests staff are eyeing strong potential for a "soft landing".

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