An economic scenario where inflation is brought under control without causing a recession or major job losses. A soft landing is the ideal outcome when central banks raise interest rates to fight inflation, but it is difficult to achieve. The term contrasts with a 'hard landing,' where efforts to control inflation trigger a recession.
A central bank raises interest rates to cool down 5% inflation. Over 18 months, inflation falls to 2.5%, unemployment stays around 4%, and GDP continues to grow modestly. This gradual improvement without a recession would be considered a soft landing.
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