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U.S. Economy, S&P 500 Face Hard Landing — Unless The Federal Reserve Does This

The biggest reason for optimism that a Federal Reserve-induced recession can be avoided next year just got revised away. Upward revisions to hourly pay in September and October and an even bigger jump in November lifted wage growth far above the range consistent with the Fed’s 2% inflation target.

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A near-consensus is emerging that the only hope of the U.S. economy avoiding a hard landing and bigger drop for the S&P 500 is for the Fed to raise its inflation target — at least in practice. The Fed may be willing to do so, but would still need to see some further cooling before ending its rate hikes.

The 2% inflation target “is a lot more elastic than the Fed is letting on, because I don’t think there’s any constituency out there for the bloodletting that would be necessary” to get there, RSM chief economist Joe Brusuelas told IBD.

Brusuelas estimates that the Fed would have to push unemployment to 6.7% to restore 2%…

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