Experts Use Aviation Terms to Describe the Economic Landscape
Some economic experts prefer using aviation terminology to describe the United States’ economic situation, particularly the stance of the central bank. For instance, Morgan Stanley’s chief economist Ellen Zentner (New York Times, June 20, 25) likened the recent central bank decision to maintain interest rates as a “wait and see” approach. Fed Chair Jerome Powell echoed this sentiment, stating, “it’s right where we are.”
US Economy Approaching a “Smooth Landing”
Towards the end of last year, the US economy was nearing a “smooth landing,” with declining inflation and low unemployment. Consequently, the central bank reduced interest rates three times in the last quarter. The uncertainty generated by the new administration’s policies, including tariffs, workforce raids, and a tax-cutting and public spending-reducing bill, prompted the central bank’s “wait and see” posture. Furthermore, geopolitical tensions in the Middle East have driven oil prices above $70 per barrel, adding to the uncertainty. President Donald Trump’s public criticism of the central bank chair has also contributed to the lack of clarity.
Key Figures and Their Roles
Ellen Zentner is Morgan Stanley’s leading economist, frequently cited in mainstream media for her insights on the US and global economies. Her analysis reflects a cautious approach to the current economic climate.
Jerome Powell, as the Chair of the Federal Reserve (the US central bank), plays a crucial role in shaping monetary policy. His “wait and see” stance indicates the Fed’s intention to monitor economic developments closely before making any further interest rate adjustments.
Impact on the Broader Economy
The central bank’s “wait and see” approach has several implications for the broader economy:
- Interest Rates: The current low-interest-rate environment supports borrowing and investment, fostering economic growth. However, if the Fed perceives risks to this stability, it may raise rates to prevent overheating.
- Inflation: The Fed aims to maintain inflation at around 2%. Should geopolitical tensions or other factors push inflation higher, the central bank may need to adjust its stance.
- Market Confidence: Uncertainty surrounding the central bank’s actions can lead to market volatility. Investors and businesses may postpone decisions until the Fed signals a clear direction.
Key Questions and Answers
- What is the central bank’s current stance? The Federal Reserve, under Chair Jerome Powell, has adopted a “wait and see” approach, carefully monitoring economic developments before making further interest rate adjustments.
- Why is the US economy being described as nearing a “smooth landing”? The US economy has experienced declining inflation and low unemployment, contributing to a positive outlook.
- What factors have introduced uncertainty into the economic landscape? New administration policies, such as tariffs and workforce raids, along with geopolitical tensions in the Middle East driving up oil prices, have created economic uncertainty.
The author is an international analyst and consultant, former director of the CEPAL office in Washington. He is a frequent economic and financial commentator for CNN en Español TV and radio, UNIVISION, TELEMUNDO, and other media outlets.
