June 17 (Reuters) – The U.S. Federal Reserve (Fed) and the European Central Bank (ECB) both have enough credibility to rein in inflation without causing a deep recession as happened 40 years ago , St. Louis Fed President James Bullard said Friday.
“Volcker’s disinflation (slowing price rise) was expensive, but it wasn’t credible from the start – Volcker needed to gain credibility,” he said at the Barcelona School Summer Forum of Economics, referring to former US central bank president Paul Volcker, who died in 2019.
In the 1980s, when the United States faced record inflation, Paul Volcker decided to raise interest rates drastically, causing an economic crisis and soaring unemployment.
“The Fed and the ECB have considerable credibility, which suggests that a soft landing is possible in the United States and in the euro zone if the transition to the post-pandemic phase is well executed,” assured James Bullard. (Report Ann Saphir; French version Claude Chendjou, told by Sophie Louet)