As a result, the fed funds rate fell from its historic high. Unfortunately, the FOMC could not support both ends, and the economy soon fell into a recession lasting from July 1981 to November 1982. The FOMC found itself in a complicated position in 1981, faced with not only high inflation, but rising unemployment as well, which would usually signal the FOMC to cut interest rates. The FOMC chose to increase interest rates to combat inflation by making it more expensive to borrow money. From 1977 to 1979, inflation more than doubled, spiking from 6.70% to 13.29%, dropping only slightly to 12.52% in 1980. The fed funds rate was so high in 19 as a response to unusually high inflation that had been on the rise since the 1970s. The federal funds rate touched its all-time high of 20% at the end of 1980 and again in the first half of 1981, when it fluctuated between 18% and 20%.
0 Comments
Leave a Reply. |