Why inflation fell without a recession

From The Economist

High interest rates, not the passage of time, have restored price stability

AT THEIR annual retreat in Jackson Hole, central bankers celebrated the fall of inflation. But do they deserve the credit? In the rich world, annual price rises in the median country are down from a peak of about 10% in early 2022 to below 3% today. Remarkably, this has been achieved without deep recessions (see Finance & economics section). The Federal Reserve will probably soon join central banks in Europe in cutting interest rates, bond yields have fallen sharply since the summer and stockmarkets have shrugged off a growth scare that struck at the beginning of August. America’s economy was in fact bigger in the second quarter of 2024 than had been forecast before the covid-19 pandemic struck.

Monetary tightening is supposed to slow growth, and in the 1980s it quelled inflation only after deep downturns. The apparent lack of damage today has led to the revival of a dangerous myth: that inflation would have gone away by itself.