This Is Jerome Powell’s Shot at a Volcker Moment—in Reverse

The pundits are coming for the Federal Reserve and Chair Jerome Powell. Mohamed El-Erian, chief economic adviser to Allianz SE and a Bloomberg Opinion columnist, recently said the central bank has made one of the worst inflation calls in its history. Writing in the Financial Times, the economist Willem Buiter called on the Fed to abandon the more flexible inflation target it established last year. The White House is feeling the heat: Polling on the handling of the economy is dismal, with inflation a key contributor. There’s plenty to make voters unhappy: Prices for gas and food are up. Rents are rising. Used-car prices are surging.

For many of today’s leading policymakers and economists, the 1970s inflation and the discontent it caused are hard to forget. Among this group, former Fed Chairman Paul Volcker is regarded as a brave public servant—the one person who had the will to break that inflation through a series of politically unpopular rate hikes that induced a recession. And now there’s pressure for Powell to pull a Volcker of his own and pivot hard to fighting higher prices. It seems like the obvious lesson of history.