The threat of deflation did not come to pass, and a year later, the Fed began to raise interest rates and tighten monetary policy, a process that would continue until 2006 as housing prices soared across most of the country.
"In order to facilitate the destocking and deleveraging process, monetary policy will remain accommodative and the fiscal policy will be more proactive".
But he also said that monetary policy was a complex process and that officials had "an enormous amount of material" at every meeting that might be difficult to boil down to just two or three numbers that represent when officials would begin to tighten policy.
The economy should be able to adjust to such changes over time, but it is unlikely to be a simple process when monetary policy is already very loose and external demand subdued".
The Bank of Japan tried to counteract that process, easing monetary policy in a bid both to support the markets and to prevent rapid yen strengthening from damaging the prospects of exporters.Government bonds in America and Germany benefited from the flight to safety that usually follows bad news.
Even if the central bank does reduce its monthly bond purchases before then, it will only have begun the process of normalizing monetary policy after five years of near-zero interest rates and other emergency measures.
"The process of normalising monetary policy in the United States and the United Kingdom is assumed to proceed smoothly, without large and protracted increases in financial market volatility or sharp movements in long-term interest rates".
Mark Carney, the governor of the Bank of Canada, pointed out that rules to promote financial stability, such as higher capital charges for big banks, will affect the process through which monetary policy decisions are transmitted to the broader economy.
Carney, speaking at an annual US central banking conference in Jackson Hole, Wyoming, reiterated his view that the recovery in Britain's economy "will likely put the decision as to when to start the process of gradual monetary policy normalisation into sharper relief around the turn of this year".
In August last year, at the annual shindig of central bankers organised by the Kansas City Fed at Jackson Hole in Wyoming, he said that "sustained momentum" in the UK economy and rising inflation would "likely put the decision as to when to start the process of gradual monetary policy normalisation into sharper relief around the turn of this year".
