Why Fed’s Goal of ‘Soft Landing’ Looks Closer Now

US policymakers led by Federal Reserve Chair Jerome Powell have been trying since early 2022 to use higher interest rates to ease price pressures without causing the economy to contract — an ideal scenario that economists call a “soft landing.” History suggests that’s almost impossible to pull off. But with inflation falling and economic output growing, economists inside and outside the Fed are increasingly convinced that policymakers might pull it off this time.

It’s when a central bank is able to slow the economy enough to curb demand and bring inflation closer to its target — 2% in the Fed’s case — but not so much as to cause a significant downturn and a big rise in unemployment. Doing that takes a combination of smart policy making and luck.