• The US is nearing a dream no-recession scenario, according to Morgan Stanley's top economist.
  • Falling inflation and steady growth show the Federal Reserve is closing in on a soft landing, Seth Carpenter said.
  • “Boy, the data are surprising to the upside,” he told Bloomberg TV Wednesday.

The US is edging closer and closer to a dream economic scenario, according to Morgan Stanley's top economist.

Seth Carpenter said Wednesday that he believes the Federal Reserve is near to achieving a so-called "soft landing" – where it manages to bring down inflation without causing a spike in unemployment.

"I wouldn't say that we've discarded it wholesale – there's always a risk," Carpenter, who is the bank's global chief economist, told Bloomberg TV, referring to the risk of a recession. "As I like to say, bad things happen to good economies all the time."

"But since the beginning of this hiking cycle we've tried to say 'a soft landing is the most likely outcome, the economy is not going to go into recession' as a base case forecast," he added. "So far, that view here has come true."

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The Fed started hiking interest rates in March 2022 – and inflation has since fallen from four-decade highs to just 3.2% as of last month.

Despite doomsayers' warnings earlier this year, its aggressive tightening campaign is yet to crater the labor market.

The US unemployment rate is still hovering below 3.5% – and Morgan Stanley expects the August Non-Farm Payrolls report, set to be released Friday, to show the economy added 155,000 more jobs this month.

Meanwhile, growth has remained resilient – with the economy expanding 2.1% between April and June, according to a government estimate Wednesday.

"There's definitely a slowdown, a soft landing – but boy, the data are surprising to the upside, in very stark contrast to the other side of the world," Carpenter told Bloomberg, comparing the US to China, which is suffering a major economic headache after lifting three years of harsh zero-COVID lockdowns at the end of last year.

Carpenter is not the only Wall Street strategist who's feeling optimistic right now – with other big banks including Bank of America revising their outlooks for the US economy in recent months.

But his own company's top stock-picker isn't so cheerful.

Morgan Stanley CIO Mike Wilson said last month that he expects the benchmark S&P 500 index to fall around 7% from its current level, as economic pressures chip away at listed companies' earnings.