What is a Goldilocks Economy?

Welcome to the Investors Trading Academy talking glossary of financial terms and events.
Our word of the day is “Goldilocks Economy”
A term which implies that a country's economic growth is steady and consistent and that there is no immediate danger of it becoming overheated and inflationary or sluggish and deflationary. The term has its roots in the well-known children's story where Goldilocks chooses the porridge which is just right, neither too hot nor too cold.
An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. There are no exact markers of a Goldilocks economy, but it is characterized by a low unemployment rate, increasing asset prices such as stocks and real estate, low interest rates, brisk but steady GDP growth and low inflation.
While business cycles vary in intensity and duration, the U.S. economy typically goes through five phases as part of the business cycle: growth/expansion, peak, recession/contraction, trough and recovery. A Goldilocks economy may occur during the recovery and/or growth phases. The U.S. economy of the mid- to late-1990s was considered a Goldilocks economy because it was "not too hot, not too cold, but just right."

By Barry Norman, Investors Trading Academy - ITA

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