The Federal Reserve should forcefully tackle the risk of inflation and the weakness of the dollar now to avoid the stagflation experienced in the late 1970s, according to Paul Volcker, the former chairman of the US central bank.

Testifying before Congress on Wednesday, Mr Volcker warned of a “resemblance” between the inflation outlook today and in the early 1970s, when the economy featured an overall tendency towards rising prices, as well as big increases in energy and agricultural prices.