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Definition

One of the functions of the Federal Reserve Bank in America and other central banks around the world is to manage the country’s economy and money supply. During periods of inflation or when the economy is perceived to be growing to quickly, Central Banks will raise interest rates to “cool” the economy and to slow inflation. If the Central bank raises rates too high or too quickly that would be a hard landing and could have negative consequences, such as pushing the economy into a recession (defined as two consecutive quarters of negative GDP growth). A soft landing is the aim of  a central bank when it seeks to raise interest rates just enough to stop the economy from overheating and experiencing high inflation, without causing an acute downturn. The term "soft landing" gained currency during the time of former Federal Reserve chair Alan Greenspan, who was acknowledged with achieving one in 1994-1995.

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