‘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
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