We hear it a lot".A soft landing for the economyA hard landing for the economyWhat does that mean?
Some netizens said:If the cost is mainly borne by the people, it is a soft landing, and if the cost is borne by banks and enterprises, it is a hard landing.
It's like a sheepfold collapsed, and the sheep is stoned to death, and you can sell wool and mutton, which is called a soft landing;If the sheepfold collapses and kills the farmer, it is a hard landing.
I don't know what everyone thinks of this statement.
Although we always hear that "the economy needs a soft landing" and "housing prices need a soft landing", in fact, throughout history, it is very rare to successfully achieve a soft landing for the economy.
A "soft land" is the ideal state of the economy. It requires the right combination and a certain amount of economic luck.
But even with such a long history of humanity, it is very rare to achieve a "soft landing" because it is really difficult to achieve.
If we look at the recent situation in the United States, many people believe that inflation in the United States is declining and the Federal Reserve is keeping interest rates unchanged, which indicates a possible "soft landing".
Imagine that inflation is a plane that is landing.
When a "soft landing" is achieved, it means that the plane (inflation) can land smoothly without any bumps or turbulence, which basically means that the Fed will be able to reduce inflation to its target level, about 2%, without triggering a recession or a sharp rise in unemployment.
In order to achieve a "soft landing" for the economy, the Fed uses its main tool – raising interest rates to combat inflation.
The Federal Reserve has been raising interest rates aggressively lately, raising them to a 22-year high, after a strong post-pandemic economy** drove inflation soaring above 9% last year.
But today's economic challenges are different from those of the past.
The last successful "soft landing" took place in the mid-1990s, when inflation was not a problemThat rate hike was more of a preemptive blow.
And this time it's completely different, because the Fed is trying to do something that has never been done before-Achieve a "soft landing" of the economy during periods of high inflation.
The reason why a "soft landing" is difficult to achieve is that in order for the plane to land successfully, there are many bumps that must be avoided, such as energy**, economic overheating, Fed interest rate hikes, and financial crises. The Fed itself is also one of the main threats to a "soft landing".
If the Fed's interest rates remain too tight for too long, it could lead to a severe recession.
Currently, inflation is down to 31%, and the unemployment rate fell to 37%, which prompted the Fed to keep interest rates unchanged.
While inflation (planes) seem to be coming down in the right direction, this does not necessarily mean that the Fed has achieved a "soft landing" for the economy.
There are many variables that can happen at any given moment.
If there is no "soft landing", it may be because there is a recession.
The question is how severe the recession is, whether it is mild or severe.
The reason a "soft landing" is so difficult to achieve is that it requires the right combination of luck and policy skills.
It is difficult to know at what level the interest rate should be set without seeing the future.