Nobody thought they could tame inflation without a recession, but the Fed chair and Treasury secretary seem to have managed a macroeconomic marvel.

BY JAMES SUROWIECKI, AUTHOR @JAMESSUROWIECKI

Illustration by Diego Patiño

Over the past six years, Federal Reserve chairman Jerome Powell has had his fair share of critics. Donald Trump, who appointed Powell in 2018, called the Fed “crazy,” “loco,” and “out of control” after it raised interest rates that same year. In 2022, Powell got labeled “behind the curve” for having kept interest rates near zero in 2021 even as inflation was starting to rise.

This year, he was lambasted for being behind the curve in the opposite direction, as the Fed kept rates steady in the face of what many thought was a weakening economy. And yet when Powell stood at the podium last month and announced that the Fed was cutting rates for the first time in four years, it was not the attacks on his record that came to mind, but rather the dexterous way in which he’s navigated the economy through the unprecedented macroeconomic turbulence of the past four years.

The U.S. economy has, after all, emerged from the Covid pandemic in surprisingly good shape. While unemployment is slightly higher today than it was a year ago, it remains low at 4.1 percent. The prime-age employment rate is at a 23-year high. Real wages are up. Inflation is back under control. And productivity and output are growing briskly: GDP was up 3 percent in the second quarter, and revisions to economic data show the economy grew faster than previously thought from 2021 to 2023.

The robust recovery has, in large part, been driven by the economy’s underlying strengths: healthy corporate profits, a strong job market, and substantial household savings left over from the pandemic. But it has been helped along by smart, cool-headed policymaking from Powell and Treasury Secretary Janet Yellen, who over the past year seem to have pulled off what most observers thought impossible: a fabled soft landing, bringing down inflation without tipping the economy into recession.

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