A key financial journalist noted that multiple vital indicators for the U.S. economy are improving simultaneously, with inflation cooling, employment showing resilience, and growth remaining robust. A "soft landing" is closer than ever before, though it is not yet assured. Recent data has reinforced the narrative of taming inflation without triggering a recession. The latest inflation report showed that core prices, excluding food and energy, rose 2.5% year-over-year in January, the lowest level since the inflationary uptrend began in 2021. Separate data indicated the unemployment rate fell to 4.3% in January, with 130,000 new jobs added, exceeding expectations.

However, positive data does not equate to mission accomplished. Core inflation remains near 3%, having risen from the low of 2.6% touched last April. The journalist pointed out that several analysts expect the disinflationary process to slow or even stall above the 2% target this year as price increases from tariffs work their way from ports to retail stores. The next steps for policy and markets are also highly sensitive. With the Fed Chair's term ending in May, a strong economy could lead the White House to push for interest rate cuts. Furthermore, the policy direction of a potential successor could reshape the future path, focusing either on "consolidating gains" or pursuing "more ambitious goals through rate cuts."

The decline in inflation is more like a snapshot; the 2% target has not yet been secured. The latest core inflation reading was partly influenced by a data gap from last fall's government shutdown, introducing a technical downward bias. Nevertheless, it shows that the start of this year did not see a recurrence of the price pressures that disrupted the disinflation narrative over the past three years. Meanwhile, the structure of inflation remains challenging. The report indicated that housing costs, previously the largest driver of inflation, have cooled significantly. However, service prices excluding housing remain stubbornly high, and prices for goods more sensitive to tariffs are accelerating. Excluding used cars, core goods prices rose at an annualized rate of 4.4% in January, the fastest pace in three years. Analysts suggest this indicates automakers are beginning to pass more costs on to consumers after absorbing tariff impacts in 2025.

The concern among Fed officials has shifted from "inflation re-accelerating" to "inflation stabilizing at an elevated level." A Federal Reserve Bank President stated last month that she would not declare victory on a soft landing, emphasizing that "inflation needs to get to 2%, and we're not done yet." She forecasts that monthly inflation readings will only align with the 2% target by year-end.

While the job market appears stable on the surface, underlying momentum is weakening. Annual revisions revealed that the average monthly job growth for the full year was only about 15,000, lower than almost any year since WWII excluding recession periods. Furthermore, new job creation was highly concentrated in healthcare and education sectors. A chief economist noted that "the worst-case scenario people feared did not happen," but he also views the labor market as "objectively weak," with the unemployment rate more likely to rise than fall this year. The stability of the unemployment rate during the reporting period was largely because businesses were neither hiring aggressively nor conducting large-scale layoffs, but this "fragile equilibrium" is not solid. Potential triggers for disruption include companies, especially those whose stock prices have significantly retreated amid AI-driven industry reshaping, potentially resorting to cost-cutting measures like layoffs.

Beyond employment, another key risk involves asset prices and consumption. Household wealth has been boosted by years of stock market gains. A sustained market sell-off could lead consumers to cut back on spending, weakening a key growth engine. Conversely, some argue that the greater risk to a soft landing stems from excessively strong consumption, which could keep inflation stuck above 2%. A chief U.S. economist expressed some nervousness about the soft landing precisely because overall household finances are healthy, with "wealth up almost across the board." He forecasts the unemployment rate will fall to 4% this year while inflation remains around 2.8%, forming a mirror image of another economist's prediction. This economist also stated that narratives about a "K-shaped economy," where spending by wealthy families masks vulnerabilities among lower-income groups, are exaggerated. While this is good news for economic expansion, it is not conducive to returning inflation to 2%.

Whether inflation continues to decline also depends on supply-side and policy variables. Several analysts expect limited room for inflation improvement this year as tariff-related price increases gradually pass through supply chains. Another chief global economist noted that AI-related capital expenditures contributed nearly 1 percentage point to economic output last year and could provide similar support this year. This economist also mentioned that ahead of the midterm elections this fall, the administration has an incentive to pursue more expansionary fiscal policy and act more cautiously on trade, given that significant tariff hikes last April increased cost-of-living pressures. He expects inflation to be around 3% by year-end.

With this combination of growth and inflation, the "last mile" of monetary policy may be more difficult to navigate. While a soft landing is closer than initially expected by many, it is not yet guaranteed. Furthermore, if the economy remains strong, the tension between the White House's desire for rate cuts and the Federal Reserve's commitment to its inflation target could become a core variable for market repricing.