On Paul Volcker’s Policy ‘Moments’:

On Paul Volcker’s Policy ‘Moments’:

"Everybody talks about the Volcker moment of Oct. 6, 1979, when the strategy and structure of implementation of policy was changed to fight inflation, and that was critical to establishing several decades of strong growth in the United States—strong price stability and strong growth.

I think there was a second Volcker moment that gets less publicity but is also important, and that occurred in the summer and fall of 1982. Paul Volcker said, “We’ve already got the economy in recession; inflation is down.” It was only down, I think, to about 4 percent, so it was still pretty high. But he said, “Enough. We’ve accomplished a lot, the costs of continuing on this process outweigh the gains.” There were problems with Latin American debt—they were feeding back on U.S. banks—as well as a very high unemployment rate.

I think it requires judgment and confidence to know when to back off [as Volcker did], and that’s going to be the next challenge for the Federal Reserve."

This excerpt is from the article "Monetary Policy at a Crossroads: Donald Kohn on Controlling Inflation, Ukraine Effects, Volcker-Era Lessons", by Enrique Martínez-García, Federal Reserve Bank of Dallas, Dallas Fed Economics, July 05, 2022