Review

From 1965 to 1974, a decade of rapid inflation, households saved relatively more of their current income than they had in the previous decade of generally stable prices. This paper updates earlier investigations of the relationship between inflation and saving to include the years 1975 through 1978. 

Early in 1978 the dollar began to decline sharply in value in the foreign exchange markets. This dramatic decline precipitated several Federal Reserve policy actions, culminating in last November’s comprehensive dollar rescue effort undertaken in cooperation with the Treasury.