WASHINGTON, Dec 18 Reuters The U.S. Federal Reserve started 2023 on a grim note, with staffers calling a recession plausible, and policymakers penciling in growth near stall speed and rising unemployment as the costs of quashing inflation with rapidfire interest rate increases.

But it ends with the Fed registering fasterthanexpected progress on inflation that occurred with virtually no rise in the jobless rate and an economy that grew fully five times faster than the 0.5 policymakers anticipated a year ago. Rate cuts are now in the offing.

We were very fortunate, over the course of the year, Atlanta Fed President Raphael Bostic told Reuters last week.

What just happened?

Over the year a series of things turned the Fed39;s way, sometimes unexpectedly and not necessarily due to monetary policy. Just as 2022 was a year of bad forecasts and bad breaks, including war in Europe, the 2023 economy began looking more normal after pandemicera excesses. It redeemed, to some degree, early Fed thinking that high inflation would ease over time without the central bank squelching growth altogether.

Actions taken by the Fed included an emergency lending program for banks that helped ease financial sector tensions at a key point. There were also legitimate surprises like a rise in productivity, and other developments tied to the economys underlying performance, like the increase in the labor force.

Institutions have evolved and opportunities have become sufficiently attractive…