I wish to share this graphical as well as short description from the Wall Street Journal - PIMCO on how the FED has influenced the economy during the last 60 years by using its power on interest rates . At the bottom you have the option to choose for example, graphical depictions on inflation, GDP growth, etc.
As we know the FED has as its options three policy tools to influence the money market, and interest rates: Open Market Operations, Reserve Requirement, and the discount rate.
The link is http://www.wsj.com/ad/pimco-rateandreaction#.VleOzCHrbg4.twitter .
The chart shows for example what the federal funds rate (FFR) was in Feb 1961. So for this given year, the FFR was 2.54% and inflation 1.54%, while GDP growth for Q4 was -3.6%.
Take your mouse and just drag to different points in the graph. With the arrow on the screen you can move ahead. It also gives an explanation of the policy effects by the FED. For example, for this year, FEB 1961, the FED's policy was to lower long term interest rates by buying long term securities, while selling short term.
June 1966 was when the FED was advocating an expansionary policy, but with inflation getting out of control. What did the FED do? to cool down the economy it raised rates.
So you will see that the FFR was 5.17%, inflation 2.5%, and GDP growth for Q2 at 5%.
October 1973 with the OPEC oil embargo, oil prices rose, inflation was at 7.8% and FFR at 10%.
