Volcker disinflation

Volcker disinflation was the sharp decline in U.S. inflation in the early 1980s, driven by Federal Reserve monetary tightening under chair Paul Volcker.

Federal funds rate: The interest rate banks charge one another for overnight loans of reserve balances. The Fed pushed this rate sharply higher to restrain borrowing and spending.
Great Inflation: The prolonged rise in inflation across the United States and other advanced economies from the 1960s through the early 1980s. Volcker’s campaign was the culmination of efforts to end this long inflationary episode.
Early 1980s recession: A severe U.S. economic downturn spanning two recessions from 1980 to 1982. High interest rates helped produce the unemployment and lost output accompanying disinflation.
Stop-go monetary policy: A pattern of alternating monetary tightening and easing in response to inflation and unemployment. Volcker’s sustained restraint broke with the earlier cycle of easing before inflation was subdued.
Monetarism: The view that changes in the money supply strongly influence nominal income and prices. Volcker’s policy shift drew on monetary targets associated with this approach.
1970s energy crisis: A period of major oil-supply disruptions and price increases during the 1970s. Oil shocks intensified the inflation Volcker inherited.
Unemployment in the United States: The share of the U.S. labor force that is jobless and actively seeking work. Unemployment rose sharply as monetary restraint cooled economic activity.
Incomes policy: Government measures such as wage and price controls intended to restrain inflation directly. Volcker relied on monetary contraction rather than direct controls on wages and prices.
Open market operations: Central-bank purchases and sales of securities that affect bank reserves and short-term interest rates. The Fed used these operations to control reserves while pursuing its anti-inflation policy.
Arthur Burns: An American economist who chaired the Federal Reserve from 1970 to 1978. His chairmanship preceded Volcker’s and became associated with the Fed’s struggle to contain inflation.

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