The Case for a Soft-ish Recession (If There Is One)

The economic world remains obsessed with recession risk. The Chinese slowdown, the erosion of consumer purchasing power in most developed countries and expeditious monetary tightening are the main culprits. But a recession wouldn’t necessarily be fatal. While much of the chatter has been around whether a recession can be avoided, little has been said about how a potential recession would be managed. And this is where drawing parallels with previous episodes has its limits. How policymakers handled recessions 30 or 40 years ago offers little valuable insight into how they’ll handle the next one. Policy approaches and toolkits have evolved, thanks in part to lessons learned from prior downturns.