Hard Landing
What Is a Hard Landing
A hard landing refers to a sharp and sudden economic downturn or recession that follows a period of strong growth, typically triggered by efforts to control inflation. Central banks may adopt restrictive measures such as raising interest rates or reducing the money supply to cool an overheating economy. However, these actions can sometimes cause a rapid decline in economic activity instead of the intended gradual slowdown.
During a hard landing, key indicators like GDP growth, employment, and consumer spending can drop quickly, leading to widespread challenges for businesses, increased unemployment, and heightened financial market volatility. This contrasts with a "soft landing," where the economy slows down more smoothly without severe disruptions. A hard landing represents a more abrupt and painful adjustment, making it particularly challenging for policymakers who must strike a delicate balance between managing inflation and maintaining economic stability.