Volcker’s 180

What’s little-recalled about Volcker is the 1980 error made by the man widely considered the greatest US central banker. 

The Fed proved too quick off the mark in easing policy before high inflation was truly vanquished, as it reacted to a weakening economy. 

It had to reverse course later, at the cost of driving the US into a deeper downturn, to finish the job

Bloomberg 22 January 2024

https://www.bloomberg.com/news/newsletters/2024-01-22/global-economy-latest-fed-interest-rate-moves

The Fed was forced to make a brief U-turn, easing access to money and credit, before resuming its inflation fight in the autumn of 1980.

In mid-1981 the economy went into another recession, the worst since the Great Depression.

By the summer of 1982, the inflation rate had fallen back into the single digits. 

Volcker, worried about the risks that a potential debt default by Mexico and other Latin American countries posed to US banks that had loaned billions of dollars to governments in the region, scrapped his brief flirtation with monetarism.

Christine Harper Bloomberg 11 oktober 2022

https://englundmacro.blogspot.com/2022/10/paul-volcker-in-late-2017-he-started.html