Paul Volcker became famous for raising interest rates to defeat U.S. inflation in the early 1980s.
President Jimmy Carter appointed Volcker chair of the Federal Reserve in August 1979. Inflation had become persistent, and expectations of continuing price increases were influencing wage negotiations, contracts, and business decisions. Under Volcker, the Federal Reserve focused more directly on controlling the growth of the money supply and accepted very high interest rates.
The policy contributed to a sharp recession in 1981–1982. Unemployment rose, housing and manufacturing were hit hard, and borrowing became expensive. However, inflation subsequently fell substantially, helping restore confidence in the purchasing power of the dollar.
Volcker is sometimes described as simply setting one high interest rate. In practice, the Federal Reserve changed its operating approach and allowed short-term rates to fluctuate sharply while restricting monetary expansion. His tenure remains a major example of the costs of disinflation.