NEW YORK -- Federal Reserve policy makers will renew their focus on the notion of a "soft landing" for the economy, an economist predicts in this week's CreditWeek report from Standard & Poor's Corp.

Michael Englund, chief economist for MMS International, said the phrase will be dredged up from the 1980s to describe the Fed's challenge for the mid1990s.

"In particular," he wrote, "the central bank will again attempt to slow the economy to a sustainable noninflationary pace without prompting what some economists view as an inevitable cyclical downturn."

"Soft landing" would serve the Fed's purpose, stating a useful objective while providing political cover for a policy that is aimed at slowing the economy.

"Many analysts note that the bond market's deterioration since the first tightening move on Feb. 4 was aggravated" by the Fed's apparent admission of inflationary potential, Mr. Englund said.

Not a Neutral Move

The Fed's stated move from an "accommodative" to "neutral" stance with the most recent tightening on May 17 "substantially remove[d] the degree of monetary accommodation which prevailed throughout 1993." The markets correctly interpreted this phrase to mean that the Fed had essentially achieved its self-defined neutral stance, Mr. Englund said.

As a result, the "neutrality" concept will no longer be useful for Fed officials, as future tightening moves would presumably be described as a move toward restraint.

"In the late-1980s, the Fed sought to achieve a 'soft landing,' whereby the economy would slow to a sustainable growth pace once it became apparent from labor statistics that full employment had been achieved," Mr. Englund said.

Although central banks never have reached the ideal of steady, sustainable, noninflationary growth, a soft landing remains desirable for the last half of a cycle "because it keeps policy focused on containing inflation through the peak in growth."

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