Economics
Fed’s Best Hope Increasingly Looks Like a ‘Semi-Hard’ Landing
- Powell may be able to engineer a growth recession, with luck
- Fed chair doesn’t see elevated risk of downturn in next year
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As the Federal Reserve wrestles with bringing down decades-high inflation, perhaps the best economic outcome it can hope for sounds like a contradiction: a growth recession.
That’s a situation where the economy expands more slowly than its roughly 1.5% to 2% long-term trend and unemployment ticks up, but an outright contraction is avoided. While falling short of the picture-perfect soft landing that Fed Chairman Jerome Powell and fellow policy makers envisage, it’s an outcome that economists like Nobel laureate Paul Krugman see as desirable to help ease persistent price pressures.