By Rachel Eliot Accountant at People's Bank of Commerce
I
n the early years of the 1970’s the easy-money policies of the American central bank designed to generate full employment resulted in high in ation. The great in ation began in late 1972 and continued through the early 1980’s. The 1970’s saw some of the highest rates of in ation in recent history, rising to nearly 20% by the end of the decade. The great in ation was
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BANKING
Is Stagflation Back?
blamed on many factors including oil prices, union leaders, and weak economic growth. Many economists point towards monetary policies that nanced budget de cits and the OPEC Oil Embargo of 1973. The Organization of the Petroleum Exporting Countries (OPEC) instituted an oil embargo in 1973 creating hyperin ation. In order to neutralize
hyperin ation from the oil embargo, the Federal Reserve raised short-term interest rates. While this increased the value of savings deposits, the cost of borrowing funds also increased. Freddie Mac began recording 30-year xed-rate mortgage rates and points in April 1971. Rates in 1971 were in the mid-7% range, and steadily increased to 9.19% by 1974. By 1979 the annual
