Unfortunately, the same is true of expectations of high and volatile inflation. During the 1970s, as inflation climbed, the anticipation of high inflation became entrenched in the economic decisionmaking of households and businesses. The more inflation rose, the more people came to expect it to remain high, and they built that belief into wage and pricing decisions.
As you know, the Federal Open Market Committee (FOMC) began to ease monetary policy in September 2007, and in December 2008, the Committee set a range of 0 to 25 basis points for the target federal funds rate. We have also employed additional tools to ease financial conditions, improve the functioning of credit markets, and thereby support economic activity.