Fed’s Mouthpiece: Wall Street Concerns Over Trump’s Potential Economic Soft Landing Disruption

The chief economic reporter of the Wall Street Journal, Nick Timiraos, known as the “voice of the Federal Reserve,” wrote in an article published on Monday that U.S. economic policymakers have been focused over the past year on achieving a so-called “Soft Landing,” which involves reducing inflation without triggering an economic recession. Now, a new leadership team is considering adjusting this approach, and they themselves acknowledge that this may lead the U.S. economy toward a hard landing.

Timiraos pointed out that:

Timiraos mentioned that statements made by Trump during a recent interview, along with subsequent comments, caused turbulence in the stock market on Monday. Senior government officials, including Commerce Secretary Howard Lutnick, have warned in recent days that tariffs could lead to one-time price increases. Meanwhile, Treasury Secretary Scott Bessent suggested that the U.S. economy may need to undergo a reset period to absorb the growth driven by government spending and rising asset prices over the past few years.

Analysts believe that the recent shift in attitude from the President and his advisors is a warning sign. Initially, the government seemed focused on downplaying the risks of rising inflation leading to higher bond yields or blaming the slowdown in economic growth on the Biden administration. However, recent remarks indicate that the government may not be worried about the economic slowdown and might even view it as necessary.

Michael Strain, head of economic policy research at the American Enterprise Institute, stated that this has left the market quite unsettled, “because once the economy is pushed toward recession, no one can guarantee it will pass quickly.”

J.P. Morgan analysts stated on Monday that “extreme U.S. policies” could increase the risk of recession, raising the likelihood of a recession in 2025 from 30% at the beginning of the year to 40%. Goldman Sachs also raised the probability of a U.S. recession within the next 12 months from 15% to 20%, stating that if the Trump administration persists with its current policies, the risk of recession may rise further, even if economic data worsens.

Some analysts warn that Trump’s comments may reflect a strategic effort aimed at improving the U.S. negotiating position with trade partners while pressuring bond investors and the Federal Reserve to lean toward interest rate cuts. In fact, Trump’s impulsive actions regarding trade and national security have prompted Chinese and European authorities to take measures to increase economic stimulus and defense spending.

Analysts noted that the situation over the past two weeks suggests that Trump is unlikely to change his policy direction due to market downturns, which helps Wall Street adjust its expectations. Andy Laperriere, head of U.S. policy research at Piper Sandler, remarked, “Everything he has done tells us he is not joking. His beliefs regarding tariffs are deeply rooted.”