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Volcker Caused A Recession To Bring Down Soaring Inflation; Powell Hopes To Achieve The Same Without A Recession
A strong economy, high inflation, and then an oil price shock…even if history does not repeat itself, it may rhyme. While we do not think the 1970s provide the map for the road ahead, it is always worth taking stock of the lessons of the past. The orthodoxy of monetary policy will be tested with the Russian invasion of Ukraine and the stagflationary shock. Let's consider the implications for the Fed and the ECB. After the inflation of the 1970s had been tamed, the views of central bankers in developed markets on commodity price shocks evolved. Inflation expectations became anchored near – indeed at times below ... (full story)