Hard Landing

A hard landing is when an economy slows down so sharply and suddenly that it tips into recession—a period of negative growth and rising unemployment. You'll hear economists and investors debate this constantly because it directly affects company profits and stock prices. When the Federal Reserve raises interest rates to fight inflation, they're walking a tightrope: raise rates too aggressively and you risk a hard landing; raise them too gently and inflation keeps running. For example, if the Fed's rate hikes cause consumer spending to collapse and companies start laying off workers, that's a hard landing scenario. The opposite—a "soft landing"—is when the economy slows just enough to control inflation without triggering a recession.