I gather the Fed was raising interest rates, but not enough to slow an economy with that level of rising inflation.
The Fed, at the time, was not raising interest rates because it was thought that the political cost of a recession caused by raising interest rates would be too high. Nixon favored keeping interest rates low. Ford was basically a caretaker government. Carter appointed Paul Volcker as chairman of the Federal Reserve, in 1979. Volcker immediately raised the Fed funds rate to 20% to curb inflation. In the process, however, he triggered a short but deep recession which contributed to Carter being a one-term President, thus proving the point.
The Fed, at the time, was not raising interest rates because it was thought that the political cost of a recession caused by raising interest rates would be too high. Nixon favored keeping interest rates low. Ford was basically a caretaker government. Carter appointed Paul Volcker as chairman of the Federal Reserve, in 1979. Volcker immediately raised the Fed funds rate to 20% to curb inflation. In the process, however, he triggered a short but deep recession which contributed to Carter being a one-term President, thus proving the point.