2012-12-19reuters.com

``Volcker was not promoted by Nixon, who valued his intellect but distrusted his party affiliation and independence. So he returned to the private sector in 1974, only to be appointed president of the New York Fed the next year. It was there that he established his reputation as an unswerving proponent of anti-inflationary policy. President Jimmy Carter promoted him to run the whole Fed in August 1979.

He showed both intelligence and boldness there. With only a tenuous majority on the Federal Open Market Committee, Volcker announced a new policy on Oct. 6 that year: the Fed would track money supply growth, wherever that might lead interest rates. Initially, it led them steeply upward, from around 12 percent to a peak close to 20 percent in April 1980. When the money supply shrank after Carter introduced direct controls on consumer credit in March 1980, Volcker responded with sharp rate cuts, 10 percentage points in two months.''


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