‘soft landing’? We could get stagflation instead.

No one wants a recession. But in our current state of understanding, the way we reduce inflation is to reduce aggregate demand. That is what a recession does. 

 Fed funds rate is still below the inflation rate. With a 0.25% bump, the range goes to 4.5% to 4.75% — still below the inflation rate. Is that enough?

First of all, there is no precise definition of a soft landing, which makes it a dangerous term. 

To me, soft landing implies that there has been a landing. That should mean some phase of policy adjustment has been completed and is no longer needed. This suggests that at the landing, the economy is on a path to grow normally with inflation at its target pace.

The “soft” part implies that policy got us there without much disruption.

Robert Brusca MarketWatch 30 January 2023

https://www.marketwatch.com/story/the-fed-expects-a-soft-landing-and-no-recession-for-the-economy-we-could-get-stagflation-instead-11675052885




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