DEFINITION of 'Soft Patch'

A period of economic slowdown amid a larger trend of economic growth. This buzzword is most often used in the financial media and by the U.S. Federal Reserve to describe a period of economic weakness.

BREAKING DOWN 'Soft Patch'

This term gained popularity when former Federal Reserve Board Chairman Alan Greenspan used it in his review of the overall U.S. economy. Central banks often cut interest rates in an attempt to spur the economy through the soft patch. An example of a soft patch would be an economic slowdown due to rising commodity prices, which is believed to be short term, with the economy growing at a faster rate after the slow patch.

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