Economists still worry recession could be on the way. But here’s how a soft landing may still be possible

The higher-than-expected January inflation data prompted some concerns that disinflation, defined as slowing inflation rates, had been put on pause.

“We are still on the path to lower inflation rates,” House said.

While headline inflation will continue to come down, it’s “not a straight line,” he said.

The Federal Reserve is expected to continue to raise interest rates. The difficulty the central bank faces is whether it can execute a soft landing.

“There are far more cases where disinflation brought about by interest rate increases by the Fed have led to a recession than not,” House said.

Economists said they still expect a recession following the new January inflation data. The question is just how severe a downturn may be.

“We are still expecting a recession for now, but it is going to be very tricky,” Eugenio Aleman, chief economist at Raymond James, said Tuesday following the release of the January CPI data.

The service sector of the economy needs to slow down further, Aleman noted. But the Federal Reserve lacks tools to prompt that area to cool off, he said.

By raising interest rates, the Federal Reserve is also trying to make it more attractive for consumers to save rather than spend, according to Aleman. However, the challenge is reversing spending patterns that have been in place for the past 20 years, he said.

The new CPI data prompted Peter C. Earle, an economist at the American Institute for Economic Research, to say he thought a recession was more likely.

The new data shows slowing disinflation, he said, while the Federal Reserve will probably have to hold rates higher for longer. Moreover, slowing economic growth may accelerate.

“The door to a soft landing is rapidly closing,” Earle said.