Paul Volcker (1927–2019)
Who They Were
Paul Volcker (1927-2019) was an American central banker whose name became synonymous with the defeat of inflation. He served as Chair of the Federal Reserve from 1979 to 1987, appointed after the 'Great Inflation' of the 1970s had pushed price increases into double digits under his predecessors Arthur Burns and G. William Miller. Volcker responded with a dramatic tightening of monetary policy, driving interest rates to punishing levels. The resulting 'Volcker shock' tipped the U.S. economy into a deep recession in the early 1980s but broke the back of inflation, with readings falling sharply from their earlier highs. A towering figure both literally and in reputation, he had earlier worked at the Treasury and the New York Fed, and he later chaired advisory bodies on financial reform.
Key Contributions
Volcker is credited with restoring the Federal Reserve's credibility as an inflation fighter. His central legacy was the demonstration that a determined central bank could break entrenched inflation, even at severe short-term cost.
- The Volcker shock: aggressive rate hikes from 1979 that forced double-digit inflation down and reshaped expectations about future prices.
- A shift toward controlling the growth of the money supply as an anti-inflation tool.
- The principle, influential ever since, that price stability is the foundation of durable growth and that central banks must sometimes accept recession to achieve it.
His success helped usher in the long disinflation that his successor Alan Greenspan would preside over, and his approach remains a reference point for how central banks confront serious inflation.
On EconRecall
Federal Reserve Chair from 1979 to 1987 whose aggressive rate hikes broke America's double-digit inflation of the 1970s. Play the games that feature Paul Volcker: