The second piece of context is that, starting last summer, we increased our policy interest rate three times, for a total of 75 basis points. In these moves, we’ve been balancing the risk of undermining the economic expansion by moving too quickly with the risk of delaying too long and needing to raise rates sharply later to rein in inflation.
By moving gradually, we’ve been able to take in new data and conduct analysis on four key issues. First, when an economy is running close to full capacity, it can actually create more capacity as firms invest and discouraged workers are drawn back into employment.