It’s a ‘primary objective’ according to the Fed chair.
has been on a rate-hiking spree since early last year, hoping to get inflation down to 2%—without spurring widespread economic hardship in the process.has declined below 4% from its near double-digit high in June 2022. But whether the central bank can meet its dual-objectives of slowing price growth and avoiding a recession—dubbed a “soft landing” by economists—remains to be seen.
The difficulty is that central bankers’ main tool for fighting inflation is raising interest rates, which can have unwanted results. Higher interest rates encourage saving money and discourage spending it. However, if activity slows too much, too fast, it can offset the benefits of slower price growth.“The alternative to a soft landing is a hard landing,” Cirksena says. “This would be the equivalent of a plane having to come down very quickly and go through an emergency-landing type of scenario.
The Fed was aggressive in its rate increases for much of 2022 and 2023, opting for 11 total increases to its federal-funds rate for a target range of 5.25% to 5.50%. By summer 2023, the bank started to ease off, even pausing its hikes several times—though indicating more increases could follow. The Fed has also indicated that even when it is done raising rates, it expects to keep them elevated until inflation is under control.
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