The Wall Street Journal examines the concept of a soft landing in economics, highlighting how the Federal Reserve aims to achieve a delicate balance of lowering inflation without triggering a recession or a significant rise in unemployment. The video explains the rarity and difficulty of soft landings, primarily due to the unpredictable nature of the economy and external factors such as energy prices and consumer confidence. It draws parallels between the current economic situation and the mid-1990s when a soft landing was successfully orchestrated under Alan Greenspan’s leadership, noting the challenges that differ today, particularly following higher inflation rates post-pandemic.
- Inflation is dropping, and the Federal Reserve is keeping interest rates steady, suggesting the possibility of a soft landing.
- A soft landing is described as economic nirvana, where inflation is controlled without causing a recession or a spike in unemployment.
- The Federal Reserve has been aggressively raising interest rates to combat high inflation, which peaked at over 9% last year.
- Interest rates have been raised to a target range of 4.75% to 5%, the highest in 22 years.
- The mid-1990s is cited as an example of a successful soft landing when the Fed raised rates from 3% to 6% and saw inflation and unemployment rates fall.
- Today’s economic environment differs from the 1990s as the Fed is attempting a soft landing after a period of higher inflation.
- Various factors such as energy prices, consumer spending habits, and potential financial crises create turbulence, making soft landings challenging.
- The Fed’s current strategy appears to be in a wait-and-see mode, avoiding premature declarations of victory over inflation.
- With inflation cooling to 3.1% and unemployment at 3.7%, the Fed’s decision to pause rate hikes is a cautious step toward achieving a soft landing.
- The success of a soft landing depends on the right mix of economic luck and policymaking skill, including the appropriate setting of interest rates.
The Wall Street Journal is an American business and economic-focused international daily newspaper based in New York City. The Journal is published six days a week by Dow Jones & Company, a division of News Corp.
AllSides Media Bias Rating: Center
https://www.allsides.com/news-source/wall-street-journal-media-bias
Official website: https://www.wsj.com
Original video here.
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