Here is a chart from WSJ Graphics which shows the level of interest rates in the US from 1980 to today. With the stagflation of the 1970’s Paul Volcker was faced with some very tough decisions. Below is an extract from an interview with him on the PBS Commanding Heights documentary.
It came to be considered part of Keynesian doctrine that a little bit of inflation is a good thing. And of course what happens then, you get a little bit of inflation, then you need a little more, because it peps up the economy. People get used to it, and it loses its effectiveness. Like an antibiotic, you need a new one; you need a new one. Well, I certainly thought that inflation was a dragon that was eating at our innards, so the need was to slay that dragon.
If you had told me in August of 1979 that interest rates, the prime rate would get to 21.5 percent, I probably would have crawled into a hole. I would have crawled into a hole and cried, I suppose. But then we lived through it.