Case Study: Volcker's Inflation Fight and Its Global Ripple Effects

In October 1979 the US Federal Reserve under Paul Volcker stopped managing interest rates and started squeezing the money supply, accepting whatever rates it took to break inflation. The federal funds rate went to 20%, the US went through two recessions, and inflation fell from double digits to under 4%. This case study walks through the whole episode: how America reached 13% inflation, the October 1979 regime change, the 1980 credit controls detour, the 1981 to 1982 double-dip, and the cost measured in jobs and output. It then follows the ripples outward: the start of a four-decade bond bull market, the superdollar and the Plaza Accord, the collapse of the 1970s hard-asset trade, Mexico's 1982 default and Latin America's lost decade, and India's 1981 IMF loan. The final chapters compare the Volcker playbook with the 2022 hiking cycle and the RBI's own disinflation, and close with a practical framework for positioning an Indian portfolio through the next inflation fight. Built for macro-focused investors, top-down fund managers and senior finance professionals.