The crypto market has melted down. Home prices in major markets are dropping. Investors in stocks and bonds are suffering.

And that could be the best-case scenario for Federal Reserve Chair Jerome Powell.

After months of steep hikes in interest rates, the Fed is facing a surprising reality: The damage to financial markets and the broader economy has been relatively modest, and inflation is showing signs of easing. Bubbles in both the stock market and home prices are shrinking from their historic surge — but only gradually. Crypto’s implosion has barely caused a ripple. And beyond Wall Street, consumer spending has held up, factory orders are rising, and the job market is consistently beating expectations.

Powell and other Fed policymakers meet this week to raise borrowing costs again in a fight against the highest inflation in four decades that they’re not close to winning. But the absence of serious strains in the financial system so far has bolstered President Joe Biden’s hopes that any recession might be mild — or avoided altogether.

If the Fed can tame inflation without crashing the economy — achieving the so-called soft landing that has eluded the central bank so often in the past — it would defy the warnings of Wall Street CEOs and most economists.

“The good news about the pricking of those bubbles is it hasn’t led to an epic collapse in the broader market,” said Kevin Gordon, senior investment research manager at Charles Schwab, who pointed to drops in more speculative investments like crypto and small stocks. But “definitely more air has to come out.”

To be certain, the risks for the economy are still heavily weighted on the downside, as Wall Street executives like JPMorgan CEO Jamie Dimon warned last week. “Inflation,” Dimon said, “is eroding everything.”

JPMorgan CEO Jamie Dimon testifies at a Senate Banking Committee annual Wall Street oversight hearing on Sept. 22.