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U.S. Federal Reserve


Why is it in the news?

  • Recently, the U.S. Treasury Secretary believes that the U.S. economy is on track for a “soft-landing” scenario despite various near-term risks.
    • These risks include a United Auto Workers (UAW) strike, a potential government shutdown, the resumption of student loan payments, and spillovers from China’s economic challenges.
  • According to U.S. Treasury Secretary, there is evidence that the U.S. economy is making substantial progress in reducing inflation while maintaining a strong labour market and healthy consumer spending.

 

Soft-landing

·       The process of monetary tightening that the US Federal Reserve does involves not just reducing the money supply but also increasing the cost of money (that is, the interest rate).

Ø  The US’ Federal Reserve does this to contain soaring inflation.

·       When a central bank is successful in slowing down the economy without bringing about a recession, it is called a soft-landing — that is, no one gets hurt.

Ø  But, when the actions of the central bank bring about a recession, it is called a hard-landing.

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