Jerome Powell has taken loads of abuse over the previous few years. The Federal Reserve chairman was blamed for mischaracterizing the rise of inflation as “transitory” in 2021, a transfer that led him to maintain rates of interest near-zero properly into the post-COVID restoration. And even after Powell admitted he had miscalculated inflation’s trajectory, main him to stroll again that “transitory” line and switch to rate of interest hikes to combat shopper worth will increase in March of final yr, he couldn’t get the critics off his again. A brand new group emerged who argued the Fed chair was being too aggressive along with his price hikes and will find yourself sending the economic system into recession. However now, Jefferies’ chief market strategist David Zervos—who has stood by Powell over the previous 18 months—is taking a victory lap amid the economic system’s resilience, branding the Fed’s critics “Jay-haters” and “Armageddonistas.” He’s even composed a “Expensive Jay” apology letter template for his or her comfort.

Criticism of Powell was particularly pointed earlier this yr after regional financial institution instability, headlined by the collapse of each Silicon Valley Financial institution and Signature Financial institution in March. College of Pennsylvania Professor Jeremy Siegel, together with Yale’s Jeffrey Sonnenfeld and Steven Tian, argued in a March Fortune op-ed that “shrapnel” from the Fed’s price hikes “killed” SVB and “could ship the economic system into recession within the course of.”

However regardless of the constant warning from Fed critics, the recession hasn’t come—a minimum of simply but—and inflation is now down greater than 4 share factors from its June 2022 year-over-year peak of 9.1%, whereas the unemployment price stays at a 54-year low. Zervos noticed this coming again in April, when he printed a market commentary titled “Armageddon Fail” ripping constant recession predictions from economists and what he described as “discredited” and “vitriolic” critiques of the Fed’s price hikes. 

The previous advisor to the Federal Reserve Board, who boasts a long time of Wall Road expertise, says he believes the central financial institution’s price hikes have had their desired impact, reducing inflation with out sparking a recession. Powell has maintained the Fed’s credibility, stored the greenback robust, and valiantly fought inflation even within the face of potential financial ache, in line with Zervos, who referred to as the technique “robust love.”

Cue the victory lap.

“Beating up on haters extra typically remains to be one in every of my favourite pastimes,” he wrote in a Monday observe. “And after I have a look at the larger macro image, away from the controversy on regional financial institution stresses, those that have been relentlessly criticizing Fed actions for the final 18 months are in determined want of a recent beatdown.”

The critics

Relating to Powell critics, the listing is lengthy and stuffed with family names, together with the billionaire investor and CEO of Starwood Capital Group Barry Sternlicht, who advised Fortune final October that Powell and his “merry band of lunatics” had been main the economic system in direction of disaster as they raised charges within the face of fading GDP progress.

“I believe possibly they’re simply not up for the duty,” he stated of the present slate of Fed officers. “Perhaps they’re not good sufficient to grasp the influence of their actions. That is form of like, and I’m not kidding right here, the inmates working the asylum.” 

Howard College’s William Spriggs additionally admonished Powell’s aggressive inflation-fighting stance, evaluating the economic system to a aircraft with failing engines that price hikes threatened to show off totally final August.

“I believe if they arrive to their senses [and pause rate hikes] earlier than September, we would be capable to eke out having a recession, however it will be laborious as a result of issues are already slowing down within the labor market,” Spriggs advised Fortune.

On Monday, Zervos argued there wasn’t a lot “new to say” to those critics on the macro entrance given inflation’s downward pattern and the economic system’s resilience, until he needed to proceed his victory lap. As an alternative, the strategist provided “an apology letter template” in his sarcastic commentary. 

“In the present day I believed I’d remind everybody of simply how deluded these critics have been by publishing an apology letter template for them to make the most of as they arrive to grips with their misguided methods,” he wrote. “I sincerely hope a number of of these people, particularly those with the very best profiles, can make use of one thing like this to come back clear. It’s time for them to make heartfelt amends with Jay.”

In fact, some may argue that Zervos is celebrating too quickly. Numerous funding banks—together with Financial institution of America, Wells Fargo, Nomura, and extra—consider a recession remains to be coming this yr. And even the Federal Reserve’s personal employees nonetheless has a light recession as their “base case” for the economic system. Nick Brooks, head of financial and funding analysis on the personal fairness agency Intermediate Capital Group, additionally advised Fortune Monday that regardless of current financial resilience a lot of conventional recession indicators “are flashing shiny purple.”

Zervos’ letter highlights the age-old debate, now renascent, in economics between monetarists from the road of Milton Friedman, who promote a extra laissez-faire strategy to coverage and consider that inflation is attributable to extra progress within the cash provide, and Keynesians, who’re named after the British economist John Maynard Keynes, and level to labor or capability shortages as the important thing driver of inflation.

Zervos, a monetarist, stands by his view that Fed Chair Powell has executed the suitable factor by shortly elevating charges since March of final yr, arguing there’s nothing extra essential than decreasing the cash provide to make sure worth stability for the economic system. And he has a request: “Please be at liberty to ahead this apology letter template to any of your pleasant neighborhood Fed critics. I’m positive you will discover various on the market.”

Right here’s that template:

Expensive Jay, 

I’m really sorry for doubting you because the summer season of 2021. I incorrectly utilized defective Keynesian demand-side theories to rebuke your financial coverage choices. Clearly, the post-COVID shocks which have hit the worldwide economic system got here predominately from the availability aspect. If I had simply seemed extra carefully on the inflation expertise in Europe, the place labor market slack was a lot higher than within the US, the supply-side storyline would have been a lot clearer. 

I’m additionally deeply sorry for having in contrast you to the late Arthur Burns. You appropriately noticed that this adversarial provide shock, which continued for much longer than initially anticipated, generated a critical danger of de-anchoring long-run inflation expectations. You then engaged in an aggressive tightening marketing campaign to make sure that the laborious work of credibility rebuilding over the past 40-plus years by the Federal Reserve was not undermined. The robust love of slowing combination demand was the one alternative in response to this provide shock. And in contrast to Arthur Burns (or his predecessor Invoice Martin), you didn’t acquiesce to partisan calls to tug again on the tightening efforts late final yr. Ultimately, your insurance policies made positive that the ghost of Burns by no means returned to these hallowed halls at twentieth and Structure Ave. And there’s no doubt in my thoughts that Paul Volcker is presently wanting down from his perch on the pinnacle of central financial institution heaven with an approving smile. 

You also needs to be extraordinarily proud that your coverage efforts have stored long-run inflation expectations in examine, the greenback robust, and time period premiums low all through this whole disagreeable inflationary expertise. It now even seems that short-run inflation expectations, after initially spiking, have come again to focus on ranges. Each measure of Fed credibility has remained absolutely intact over the past 18 months as you fought again in opposition to this provide aspect storm that introduced us to a peak of 9% inflation. All I can say is, bravo, Jay!! 

After realizing my misguided financial methods, I needed to share with you that I will probably be spending the subsequent few years retooling. It actually seems that I’ve underestimated the essential neoclassical/supply-side work of economists similar to Lucas, Sargent, Wallace, and so many different freshwater macro theorists. Sadly, I received hung up on old-school Keynesian demand-side IS/LM-based theories that coveted issues like Corridor’s consumption perform and the Phillips curve. These ideas are clearly failures. My economics coaching requires an entire pivot now. Thanks for serving to me see the sunshine.  

I sincerely hope you may forgive me. I used to be fully flawed. Your efforts had been really Herculean throughout this troublesome interval. Thanks to your tireless efforts to maintain long-run inflation expectations anchored. There may be nothing extra essential for creating most sustainable long-run progress potential than low, secure, and anchored long-run inflation expectations. The American individuals are deeply indebted to you for “preserving at it” throughout this epic inflation battle. 

With the deepest of each remorse and sincerity, 

[Insert a Jay-hater name here.]