The central bank faces major obstacles in achieving the economic feat since it lacks precise tools for guiding economic performance and faces factors like the Russia-Ukraine war that extend beyond its control.
Federal Reserve Chair Jerome Powell speaks at the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institute, Nov. 30, 2022, in Washington.The aggressive fight against inflation by the Federal Reserve has heightened the risk of a downturn that could putBut the central bank hopes it can cool off price hikes without sending the economy into a recession, accomplishing a best-of-all-worlds outcome known as a “soft landing.
Economists told ABC News they consider the metaphor apt, since the process of landing a plane captures the careful guidance necessary to steer the economy down from high inflation. The primary tool deployed by the Federal Reserve in its fight against inflation is the interest rate hike, which increases borrowing costs, essentially making it more difficult for individuals and businesses to access loans.
"The central bank doesn’t have absolute precision instruments," said Blinder. "Nor can it forecast with great accuracy where the economy would be if it does nothing."
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