The U.S. Federal Reserve admitted this morning that the United States has a 70% probability of entering into a recession in Q3 of 2022. It has a delicate job in front of it — pumping the brakes on the economy in such a masterful way that it achieves what is known as a “soft landing.”
Basically, the central bank is trying to curb demand and bring prices under control without tipping the economy into recession.
But cracking down on sky-high inflation is already turning out to be a tough task. The Fed’s top policymakers later this week are expected to raise interest rates for the fourth time in five months. They have moved more aggressively than expected at the beginning of the year.
Fed chair Jerome Powell has recently suggested that a “softish” landing for the economy is possible.
But history suggests achieving that perfect landing is easier said than done.
So, what exactly is a soft landing?
Like a pilot gently landing an airplane, it takes a deft touch on the throttle to avoid an economic stall.
“The Fed slows the economy down by raising interest rates, which cuts spending,” says Princeton economist Alan Blinder. “If you do too much of that, you’re going to get a recession.”
NYC Journals 