Persistent Inflation Sparks Concerns of 'No Landing' Scenario

Persistent inflation has raised concerns about a 'no landing' scenario, indicating fears of sustained economic turbulence. This situation suggests challenges in stabilizing prices and maintaining growth, posing risks to financial stability. Policymakers and economists are closely monitoring the situation to mitigate potential long-term impacts on the economy.

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Following extensive discussions surrounding the concept of a "soft landing," which aims to rein in inflation without triggering an economic downturn, the emergence of a new term, the "no landing" scenario, has garnered attention. This term has surfaced against the backdrop of the sustained vigor of the U.S. economy and the revelation of inflation readings surpassing expectations.

In contrast to the previously outlined concepts of a soft landing and a hard landing, which entail managing inflation with varying impacts on economic activity and employment, the "no landing" scenario depicts a situation where strong economic expansion persists alongside persistent inflation despite efforts by the Federal Reserve or other central banks to mitigate it.

According to findings from Bank of America's Global Fund Manager Survey, which assesses the sentiments of approximately 300 institutional, mutual, and hedge fund managers worldwide on a monthly basis, the probability of a "no landing" scenario for the global economy within the next 12 months is now perceived as considerably higher compared to the beginning of the year.

In April, findings from the survey revealed that 36 percent of respondents viewed a "no landing" scenario as the most probable outcome for the next 12 months, a notable increase from the mere 7 percent reported in January. Concurrently, the once-feared "hard landing" scenario is no longer seen as a likely prospect by the majority of fund managers. This shift in sentiment comes against the backdrop of robust economic indicators in both the United States and internationally, which have alleviated concerns of a recession. However, it has also tempered expectations for imminent rate cuts by central banks worldwide.

Source: statista