Inflation is down and a recession is unlikely. What went right?

The aeronautical metaphor has two components: bringing down inflation to 2%, and avoiding a recession. Many economists had once believed that this would prove impossible. History showed that when central banks raised interest rates quickly, economic misery soon followed as people struggled to repay their debts and it became too expensive for companies to borrow in order to invest. The biggest ever co-ordinated global monetary tightening, which began in the late 1970s, provoked a big downturn in the early 1980s. From late 2021 to early 2024 the rich world’s average policy rate rose by five percentage points—not by quite as much as in the late 1970s, but still one of the fastest increases on record (see chart 1).