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The period from May 1983 to October 1984 saw the Federal Funds rate move from 9.5% to 11.75%; this change happened through a series of six increases of about 1/4-1/2%. While the Fed pursued a contractionary monetary policy during this period there was one expansionary move when they allowed the Federal Funds rate to drop from 9 5/8% to 9 1/4% between August and December of 1983. The Fed acted far less aggressively with the discount rate raising it only once, 1/2% from 8 1/2% to 9% in April of 1984.

The reasons for this period of contractionary policy may be that the1982 inflation rate was 6.2%, and the Fed may have been trying to bring this number under control. Apparently this worked as the 1983 inflation rate fell to only 3.2% rising to 4.3% in 1984. Total real GDP in the period grew a total of 9.7%; from 5090 billion in 1983 II to 5585 billion in 1984 IV.

One odd occurrence is that the 1983 U.S. unemployment rate was 9.6%, comparable to European countries at the time, yet fell to 7.5% in 1984 despite a contractionary policy. This decrease in unemployment may have been due to the steady growth of the economy during the period. The Fed probably decided that they could fight the inflation with contractionary policy, while relying on healthy economic growth to decrease unemployment.

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