Sharpen Your Skills: Make Predictions In June 2004, the Federal Reserve began a policy

Chapter 17, Problem 32

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Sharpen Your Skills: Make Predictions In June 2004, the Federal Reserve began a policy of increasing the federal funds rate from the lowest rate in the last four decades of 1.0 percent. Over the next two years this key rate was raised 17 times to reach a level of 5.25 percent on June 29, 2006. The Feds stated reason for this policy was to head off the possibility of increasing rates of inflation. A problem with this policy, however, was the fact that a significant cause of higher prices at that time was the rapidly growing cost of energy. Between June 2004 and June 2006, the price of a barrel of oil more than doubled from less than $30 to more than $70. It was not clear that the international price of oil would respond to changes in interest rates in the United States. What has happened to the federal funds rate and the price of oil since 2006?