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The Fed kept rates low in the first three quarters of 1998, but it then suddenly lowered the rate even further in the fourth quarter of 1998. The Fed was concerned about the possible negative effects on the U.S. economy from the Asian financial crisis. As it turned out, the U.S. economy was not much affected, and the growth rate in 1998-2000 was strong. By the end of 1999, the unemployment rate was down to about 4 percent. Although inflation remained low in 1998 and 1999, the Fed got nervous in the middle of 1999 about the economy overheating (largely due to the stock market boom). The Fed began raising rates. By the middle of 2000, the delicate task of the Fed was to prevent the economy from overheating without at the same time causing a stock market crash and bringing the economy into a recession! Read more about the Fed's attempts to affect the economy in the Companion web site.
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