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Volcker Is Not a Costume

The early-1980s funds rate was a different regime. Invoking the name does not import the policy.

By Arthur Lin, Economics Columnist

New York1 min read

a large building with columns and a flag on the corner
a large building with columns and a flag on the cornerPhoto by Joshua Woroniecki on Unsplash

Paul Volcker's Federal Reserve pushed short-term interest rates into double digits at the turn of the 1980s. The effective funds rate reached about 19 percent in 1981. Inflation then was also far above anything in the published prints of the last few years. The episode is real. It is not a jacket a later chair can put on.

Later cycles started from different places. The target range went to 0 to 0.25 percent in December 2008. The hiking cycle that began in 2022 started near zero, not from the teens. Comparing a quarter-point move today with Volcker's weekend is a rhetorical move. It should be labeled as rhetoric.

History is useful as scale. It is useless as costume. Citing 1981 measures distance; it does not predict a repeat. The current target range is whatever the latest statement says it is. That sentence does not require a ghost.

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