Soft landing
Topic: Economic Growth Theories and Business Cycles · NCERT: Beyond NCERT
Meaning
A soft landing happens when the central bank tightens monetary policy and brings inflation down without causing a recession. Tightening means raising interest rates to cool demand. The goal is to slow an overheated economy gently rather than crash it. The opposite is a hard landing, where tightening causes a sharp downturn.
Example
The RBI raised the repo rate from 4.0% to 6.5% between May 2022 and February 2023. The repo rate is the rate at which it lends to banks. CPI inflation then eased while growth held up. In the US, the Fed also tightened in 2022-23, and the US avoided a recession through 2024.
Don't confuse with
- Hard landing: in a hard landing, tightening causes a sharp downturn or recession. A soft landing avoids this.
Related concepts
- Business cycle
- Expansion
- Overheating
- Goldilocks economy
- Peak
- Trough
- Recovery
- Economic slowdown
- Growth recession
- Recession