Volcker Disinflation

About Volcker Disinflation

See related entry on Volcker Shock. Paul Volcker became Fed Chairman in August 1979 with inflation at 11 percent. On October 6, 1979, the Saturday night special, the Fed shifted from targeting interest rates to targeting the money supply. Interest rates rose to over 20 percent. The economy entered a severe recession. Unemployment exceeded 10 percent. Construction and manufacturing were devastated. Inflation fell to under 4 percent by 1983. Volcker, at 6 foot 7 inches, became a controversial figure, picketed by farmers and autoworkers. The Volcker disinflation established that the Fed was willing to endure political pain to control inflation. His legacy influenced central banking for 40 years.