A senior Federal Reserve economist said the latest data on consumer spending, wages and prices suggest the central bank’s chances of achieving a soft landing for the US economy have improved a bit following a big markdown in recent months.

“Some of the releases were pointing to perhaps revisiting the likelihood of a soft landing,” Andrea Raffo, the Minneapolis Fed’s director of research, said in an interview at the bank Thursday. “We had reduced that greatly. Marginally, we probably are becoming more confident that we could accomplish that.”

Research directors at Fed banks play a key role in policymaking because they oversee the series of briefings that bank presidents receive ahead of Federal Open Market Committee meetings, where Fed officials make decisions on interest rates. They also help prepare the quarterly interest-rate projections that officials take to the meetings and the Fed publishes afterward.

Raffo said his staff is just beginning to prepare presentations for the briefings that the bank’s president, Neel Kashkari, will receive ahead of the next meeting, which is set to take place Dec. 13-14 in Washington.

Economists surveyed by Bloomberg see a US recession as more likely than not in the next 12 months, thanks to a steep series of Fed rate hikes aimed at curbing the fastest inflation in 40 years.

Kashkari, for his part, said Thursday that the “overwhelming” message from contacts in the region is there is a lot of demand and that there aren’t enough workers to meet that demand.

“I’m not seeing much evidence of cooling,” Kashkari said at a Minnesota Chamber of Commerce event, adding it’s an “open question” how far the central bank has to go with rates.

Data Points
Raffo pointed to several data points -- including the employment cost index, the consumer price index, the producer price index, retail sales and unemployment -- whose most recent readings suggested a soft landing may still be in reach.

“We had seen already a relatively positive ECI release a couple of weeks ago. Then the CPI followed. The PPI was also indicating a decline in some of the goods prices that, for a while, we were puzzled, because we were seeing import prices very weak, and we were not seeing transmission to PPI and goods prices,” Raffo said. “It was reassuring to see some of these developments, which were part of the soft landing story.”

But he also echoed other Fed officials in cautioning that the central bank will need to see more than a month’s worth of such indicators to relax its tough stance. The Labor Department will publish its next CPI report on Dec. 13, just before the FOMC meeting begins. Whether good news from that report would come in time to have a significant impact on the new rate projections remains to be seen.

“But the data, they come out a little bit on the right side, and we take it,” Raffo said. “We are happy about that.”

This article was provided by Bloomberg News.