A soft landing in the

business cycle Business cycles are intervals of general expansion followed by recession in economic performance. The changes in economic activity that characterize business cycles have important implications for the welfare of the general population, governmen ...

is the process of an economy shifting from growth to slow-growth to potentially flat, as it approaches but avoids a

recession In economics, a recession is a business cycle contraction that occurs when there is a period of broad decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be tr ...

. It is usually caused by government attempts to slow down

inflation In economics, inflation is an increase in the average price of goods and services in terms of money. This increase is measured using a price index, typically a consumer price index (CPI). When the general price level rises, each unit of curre ...

. The criteria for distinguishing between a '' hard'' and ''soft'' landing are numerous and subjective. The term was adapted to economics from its origins in the early days of

flight Flight or flying is the motion (physics), motion of an Physical object, object through an atmosphere, or through the vacuum of Outer space, space, without contacting any planetary surface. This can be achieved by generating aerodynamic lift ass ...

, when it historically was the method of the

landing Landing is the last part of a flight, where a flying animal, aircraft, or spacecraft returns to the ground. When the flying object returns to water, the process is called alighting, although it is commonly called "landing", "touchdown" or " spl ...

hot air balloon A hot air balloon is a lighter-than-air aircraft consisting of a bag, called an envelope, which contains heated air. Suspended beneath is a gondola or wicker basket (in some long-distance or high-altitude balloons, a capsule), which carri ...

s, by gradually reducing their

buoyancy Buoyancy (), or upthrust, is the force exerted by a fluid opposing the weight of a partially or fully immersed object (which may be also be a parcel of fluid). In a column of fluid, pressure increases with depth as a result of the weight of t ...

. It later also applied to

aviation Aviation includes the activities surrounding mechanical flight and the aircraft industry. ''Aircraft'' include fixed-wing and rotary-wing types, morphable wings, wing-less lifting bodies, as well as lighter-than-air aircraft such as h ...

, gliders and

spacecraft A spacecraft is a vehicle that is designed spaceflight, to fly and operate in outer space. Spacecraft are used for a variety of purposes, including Telecommunications, communications, Earth observation satellite, Earth observation, Weather s ...

, as in the

Lunar lander A lunar lander or Moon lander is a Lander (spacecraft), spacecraft designed to Moon landing, land on the surface of the Moon. As of 2024, the Apollo Lunar Module is the only lunar lander to have ever been used in human spaceflight, completing s ...

. In the United States, modern recessions and hard and soft landings follow from

Federal Reserve The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of ...

tightening cycles, in which the

Federal funds rate In the United States, the federal funds rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight on an collateral (finance), uncollateralized basis ...

is increased over several consecutive moves. In modern times, the most notable, and possibly the only true soft landing in the most recent 16 business cycles occurred in the soft landing of 1994, engineered by

Chairman

Alan Greenspan Alan Greenspan (born March 6, 1926) is an American economist who served as the 13th chairman of the Federal Reserve from 1987 to 2006. He worked as a private adviser and provided consulting for firms through his company, Greenspan Associates L ...

through fine tuning of interest rates and the

money supply In macroeconomics, money supply (or money stock) refers to the total volume of money held by the public at a particular point in time. There are several ways to define "money", but standard measures usually include currency in circulation (i ...

.Whither Goldilocks?
The Big Picture, September 22, 2006 , Sources: Business Outlook Survey, Federal Reserve Bank of Philadelphia September 2006, http://www.phil.frb.org/files/bos/bos0906.html , U.S. LEADING ECONOMIC INDICATORS, The Conference Board U.S. Business Cycle Indicators, AUGUST 2006, http://www.econbrowser.com/archives/2006/09/can_it_be_that.html A soft landing by a central bank is when "the central bank tightens monetary policy to fight inflation but does not cause a recession". If it causes a recession, then it is a hard landing. In addition to being a certain type of business cycle, a soft landing may also refer to a

market segment In marketing, market segmentation or customer segmentation is the process of dividing a consumer or business market into meaningful sub-groups of current or potential customers (or consumers) known as ''segments''. Its purpose is to identify pr ...

industry sector Industry classification or industry taxonomy is a type of economic taxonomy that classifies companies, organizations and traders into industrial groupings based on similar production processes, similar products, or similar behavior in financial m ...

that is expected to slow down, but to not crash, while the wider economy may not experience such a slow down at that time. For example, a contemporary newspaper headline read "Soft landing forecast for house prices as rate hikes stem growth". One of the main goals of the Joe Biden administration was to achieve a soft landing in order to avoid a recession. In 2024, economists estimated that the U.S. was successfully achieving a soft landing. By early 2024, the ''New York Times'' wrote that the United States stood out among economies worldwide in its strength and that the United States had successfully managed to reduce inflation without the kind of hardship that many economists had expected would occur. The United States was projected to achieve another soft landing as key economic benchmarks indicate after the second quarter of 2024 that inflation is projected to return to the Federal Reserve's target of 2% per annum without a recession occurring. However, by March 2025, a few weeks into

Donald Trump Donald John Trump (born June 14, 1946) is an American politician, media personality, and businessman who is the 47th president of the United States. A member of the Republican Party (United States), Republican Party, he served as the 45 ...

's second presidency, it was reported that a soft landing was at risk due to implementation of extreme economic policies.

References

Business cycle {{business-term-stub

See also

References