The Federal Reserve took action at the peak of the business cycle. The peak of the business cycle is the point at which the economy is at its highest level of activity before it begins to decline.
At this point, the economy is then growing at an the unsustainable rate and inflation is the accelerating. The Federal Reserve intervenes to slow the economy and decrease inflation by raising interest rates and decreasing the money supply, both of which decrease aggregate demand and the slow economic growth. This intervention was helps to the level out both inflation and employment, stabilizing the economy.
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