Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Hard Landing

What it is:

A hard landing refers to an abrupt downward shift in economic growth resulting from monetary policy.

How it works (Example):

Inflation historically accompanies periods of economic expansion. In the U.S., the Federal Reserve has an obligation to control inflation through monetary policy, specifically via adjusting short-term interest rates and conducting open market operations.

A hard landing can occur when a central bank raises rates excessively during a period of economic expansion. The consequent increase in interest rates places downward pressure on the demand for new loans. Companies experience a slowdown in growth and consumer confidence falls, causing the economy to contract quickly in a short amount of time.

Why it Matters:

Monetary policymakers generally try to circumvent hard landings by making incremental rate adjustments small enough to maintain consistent price levels without disturbing upward growth.

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...