Editing Stagflation (section)

==Responses==
Stagflation undermined support for the Keynesian consensus.{{cn|date=November 2024}}

Federal Reserve chairman [[Paul Volcker]] very sharply increased interest rates from 1979 to 1983 in what was called a "[[disinflation|disinflationary scenario]]". After US prime interest rates had soared into the double-digits, inflation did come down; these interest rates were the highest long-term prime interest rates that had ever existed in modern capital markets.<ref>{{Harv|Homer|Sylla|Sylla|1996|loc=p. 1}}</ref> Volcker is often credited with having stopped at least the inflationary side of stagflation,{{Citation needed|date=May 2023}} although the American economy dipped into a [[Early 1980s recession in the United States|recession]] with the unemployment rate peaking at 10.4% in February 1983.<ref>{{Cite web |title=Business Cycle Dating |url=https://www.nber.org/research/business-cycle-dating |access-date=2023-05-01 |website=NBER |language=en}}</ref> Economic recovery began in 1983. Both fiscal stimulus and money supply growth were policy at this time. A five- to six-year jump in unemployment during the Volcker disinflation suggests Volcker may have trusted unemployment to self-correct and return to its [[natural rate of unemployment|natural rate]] within a reasonable period.{{Citation needed|date=April 2008}}