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With a resilient job market and consumer spending raising hopes the U.S. economy will achieve a “soft landing,” a top Cambridge Trust banker sees that there remains a risk the Federal Reserve will take its interest rate hikes too far, leading to recession.

“If you look back in history, the Fed has never been able to manufacture a soft landing. They raise rates until something breaks. So Fed cycles don’t typically end of old age, they end when something breaks and that’s usually a sign that things have gone too far,” Ryan Hanna, senior vice president, deputy chief investment officer and director of equities at Cambridge Trust, said during the bank’s third quarter wealth management market update webinar.

The resilient job market and consumer spending is keeping the economy afloat against potential recession and is steering the economy towards a soft landing. But in his outlook, Hanna said that the economy is not yet out of the woods as risks and uncertainties remain.

“But the fact that we have been able to bring inflation down while maintaining a relatively full job market, [the rate hike campaign] has to be deemed somewhat successful,” he added.

Hanna reported stronger-than-expected economic growth and corporate earnings growth in the second quarter as positives but cited a number of risks for negatives such as the long and variable lags from Fed policy, high commercial real estate exposure of regional banks, rising jobless claims and many others.

The Cambridge Trust executive said while there are still growing risks and concerns about keeping inflation down, the U.S. is doing a good job of trending at an annualized GDP growth rate of 1.5 percent to 2 percent compared to other countries like China, which experienced deflation.

“US is showing a pretty decent GDP growth but we need to be diligent. The Fed needs to be on top of things to make sure we don’t go too far, and to keep a lid on inflation,” Hanna said.

Due to the high-interest rate environment and moves to increase capital reserves, local banks are experiencing a compression in profit margins as funding costs rise and the general demand for loans eases. In addition, some local banks have pulled back on lending over fears about a potential recession.