Paul Volcker

Paul A. Volcker (September 5, 1927 – December 8, 2019) was an American economist and central banker who served as the twelfth Chairman of the Board of Governors of the Federal Reserve System from August 6, 1979, to August 11, 1987. Appointed by President Jimmy Carter and reappointed by President Ronald Reagan, Volcker confronted entrenched double-digit inflation peaking at 14 percent in 1980, driven by prior loose monetary policies and supply shocks.

On October 6,, Volcker shifted Federal Open Market Committee operations from interest rate targeting to non-borrowed reserves targeting, enabling sharp hikes in the federal funds rate that pushed the prime lending rate above 21 percent. This policy induced two recessions, with unemployment surging from under 6 percent in to over 10 percent by, yet it decisively anchored inflation expectations and reduced price increases to around 3 percent by 1983, restoring the Federal Reserve's credibility and enabling sustained economic expansions in subsequent decades. Volcker's tenure exemplified the causal primacy of monetary restraint in curbing inflation, prioritizing long-term stability over short-term output costs despite political opposition.