Ben S Bernanke: Panel discussion: what have we learned since October 1979? (Central Bank Articles and Speeches)

This consensus marks a considerable change from the views held by many economists at the time that Paul Volcker became Fed Chairman. In 1979, most economists would have agreed that, in principle, low inflation promotes economic growth and efficiency in the long run. However, many also believed that, in the range of inflation rates typically experienced by industrial countries, the benefits of low inflation are probably small particularly when set against the short-run costs of a major disinflation, as the United States faced at that time. Indeed, some economists would have held that low-inflation policies would likely prove counterproductive even in the long run, if an increased focus on inflation inhibited monetary policy-makers from responding adequately to fluctuations in economic activity and employment.