World Economy · Learn with evidence
The Great Inflation
1965–1982 · Inflation and expectations
Starting conditions
Inflation became a persistent problem across the late 1960s and 1970s. Energy shocks added pressure to an already difficult policy environment.
How the problem spread
Supply disruptions raised costs, while policy choices and expectations helped sustain inflation. Oil alone does not explain the entire episode.
The response
Under Paul Volcker, the Federal Reserve pursued tighter monetary policy to bring inflation under control.
What happened afterward
Inflation declined substantially in the early 1980s, alongside severe recessions and high unemployment. Restoring price stability carried major short-term costs.
Limits of the comparison
The source of inflation, wage setting and policy credibility vary across episodes; matching an oil-price increase is not enough.
Think it through
Why might containing inflation become harder after people expect it to persist?
Read the historical source · Checked 2026-09-09
Explore the economic concept →