The Federal Reserve is approaching a potential 'soft landing' for the economy, a rare achievement marked by controlled inflation without triggering a recession.

The Fed's rapid disinflation efforts over the past two years mirror those of the 1990s, when the central bank successfully reduced inflation while promoting economic growth.

Historically, the disinflation of the 1990s led to significant productivity gains, averaging over 2% annually, bolstered by technological advancements and favorable trade policies.

Current factors like improving labor productivity and advancements in artificial intelligence suggest a potential for sustained economic expansion in the future.

The U.S. service sector, which makes up about two-thirds of total spending, stands to gain immensely from the integration of AI technologies, potentially propelling the economy into an 'AI-driven boom.'

However, rising tariffs could complicate the Fed's strategy by increasing goods inflation, which might force the central bank to raise policy rates instead of achieving its neutral rate target by the end of 2027.

There are significant uncertainties ahead, particularly regarding the impact of increased tariffs, which could undermine the Fed's efforts to curb inflation.