The effects of low interest rates As I have already discussed, the current level of the federal funds rate came about in response to a weakening economy in 2001 and a recovery that has been characterized by the persistence of considerable slack in labor markets and low and declining inflation.
Therefore, careful monitoring of the incoming data on inflation and inflation expectations will continue to be necessary, especially given the potential risks to price stability that are associated with the rapid increase in energy prices and the depreciation of the dollar.