In October 2009, the Fed was forecasting that unemployment will average 9.8 percent in 2010 and said the federal funds rate will remain "exceptionally low" for "an extended period". But some officials were beginning to worry about unwinding the $2 trillion in special credits that have boosted the monetary base and to wonder if the interest rate might need to start rising soon.
Source: The New York Times, October 9, 2009
- Describe the time lags in the operation of monetary policy and explain why they pose a challenge for the Fed in deciding when to start raising the federal funds rate target in a recession.
- What are the monetary policies implemented by the Fed in more recent times. Do you think those are effective measures to boost the economy?