The central bankers steering the world’s largest economies are attempting something that history suggests is rarely achieved cleanly, bringing inflation to heel without tipping their economies into recession. As of early August, the so-called soft landing looks more plausible than it did a year ago, though nobody involved is prepared to declare victory.
The task is one of timing above all. Cut interest rates too soon and the inflation that has been so painfully suppressed could flare again. Hold them too high for too long and the economy that has withstood the pressure so far could finally buckle. The margin for error is thin, and the consequences of getting it wrong are measured in jobs and livelihoods.
What makes the current moment unusual is how much has gone right despite the warnings. The aggressive tightening of recent years was widely expected to force a downturn, and for the most part it has not. Whether that reflects sound policy or simple luck is a question economists will argue over for years.
For businesses and households, the practical question is when borrowing becomes cheaper again. Every mortgage holder and every firm carrying debt is waiting on decisions made in a handful of rooms around the world. The central banks have navigated the hardest stretch better than feared. The landing, soft or otherwise, is still ahead of them.
