Of course, there is an alternative hypothesis: Monetary policy was not capable of offsetting or mitigating the sorts of real challenges the economy was facing. Distinguishing between these two hypotheses will undoubtedly be the subject of intense research in the coming decades. After all, economists are still studying the policy choices and their effects during the Great Depression eight decades ago.
But let me turn our attention to how monetary policy should evolve going forward. I began my remarks by noting that monetary policy should focus on the intermediate to longer term and be less sensitive or reactive to short-run and transitory movements in the data.