Central bank’s Governor Christopher Waller promised Tuesday that the rate-deciding group will not repeat the same mistakes it did in the 1970s on inflation.
Waller said, “We know what happened for the Fed not taking the job seriously on inflation in the 1970s, and we aren’t going to let that happen.”
Waller said that the central bank will follow its plans to raise interest rates until inflation returns to the Fed’s targeted level.
Currently, inflation is running at its highest pace in the last 40 years. President Joe Biden yesterday said that inflation is the economy’s biggest challenge currently and expressed that fighting an increase in inflation starts with the central bank.
Recognizing the political independence of the central bank, Biden said, “The Fed should do its job, and it will do its job. I’m convinced of that in my mind.”
The moves by the then-fed chair Volcker in the 1970s and early 1980s took the Fed’s interest rate to close to 20% and the economy entered a recession phase.
Waller said that the economy can withstand the gentler rate hikes this time than in the Volcker era.
Waller added, “The labor market is strong. The economy is doing so well. This is the time to hit it if you think there’s going to be any kind of negative reaction because the economy can take it.”