The Data Are Unambiguous
The Federal Reserve's latest Summary of Economic Projections tells a story that Chairman Powell would prefer not to narrate. Core PCE inflation remains stubbornly above the 2% target. GDP growth projections have been revised downward. And the "dot plot" — that peculiar exercise in collective forecasting — now suggests fewer rate cuts than markets had priced in.
Indeed, one might observe that the entire soft landing narrative was, from the outset, more aspiration than analysis.
To put it plainly: the Fed printed $5 trillion during the pandemic, held rates at zero for two years while inflation accelerated, then spent the next eighteen months insisting they could raise rates aggressively without consequence. The numbers tell a different story.
The Inflation Arithmetic
Cumulative inflation since January 2020 exceeds 20%. That is not a transitory phenomenon. That is a structural repricing of the American economy. The grocery bill that was $150 is now $180. The rent that was $1,500 is now $1,900. The car payment that was $400 is now $750.
The Federal Reserve measures inflation year-over-year and congratulates itself when the rate declines. Respectfully, this is like celebrating that the boat is sinking more slowly. The water level hasn't dropped.
One cannot spend what one does not have — except, apparently, in Washington. And when Washington spends it anyway, the bill arrives as inflation, payable by every American who buys groceries, fills a gas tank, or pays rent.
The Corporate Earnings Divergence
Let us consult the actual data. S&P 500 earnings are up. Consumer spending is technically positive. These are the statistics the administration cites as evidence of economic health.
What they omit is the divergence. Large-cap corporate profits are being driven by pricing power — the ability to raise prices faster than costs increase. Small business margins are being crushed. Consumer spending is increasingly debt-financed, with credit card balances at all-time highs and savings rates near historic lows.
This is, quite simply, fiscal insanity dressed in a Brooks Brothers suit.
What the Market Knows
The bond market — which, unlike equity markets, cannot afford the luxury of optimism — is pricing in persistent inflation. The 10-year Treasury yield remains elevated. The yield curve's prolonged inversion was historically the most reliable recession indicator we have. The market has a way of correcting political fantasy.
The soft landing was always a marketing slogan, not an economic forecast. The data have made that clear. The question now is not whether the landing will be rough, but how rough, and whether the Fed will acknowledge reality before the runway runs out.
