In April 2000, the seasonally adjusted unemployment rate was 3.8 percent. By June 2001, the unemployment rate

Question:

In April 2000, the seasonally adjusted unemployment rate was 3.8 percent. By June 2001, the unemployment rate had increased to 4.5 percent. Yet the measures by the Federal Reserve to reduce short-term interest rates were taken in stages, and in fact the unemployment rate continued to rise. What might have motivated the policymakers’ cautious behavior?