tead, there needs to be appropriate analysis to determine which works best at the present time, and adjust accordingly.The reason for more apparent activity by the Fed during 1994 can be explained by three factors. First, the increasing focus on price stability allowed the Fed to take action without having to worry as much about how it affected the other 5 goals. Second, an increasing use of interest rate targets meant that they were using targets that were more indicative of the effectiveness of its policy tools and the need for further action. Continuing to track monetary aggregates may not have revealed the need to take action. Third, the economy had been heating up and some action to slow the growth was simply needed at this time.The change in the Fed’s policy actions from 1993 to 1994 is not as drastic as it may first appear. It is merely a continuing evolution of the manner in which the Fed executes the strategy and tactics of its monetary policy. The effectiveness of this modification of its policy is borne out by the lack of any visible sign of inflation at the end of 1994. Additional time will provide the necessary information to determine if this policy stance is still effective in the future and adjustments will undoubtedly have to be made....
