
248 A Systems Perspective on Financial Systems
too hot and inflation seems to rise, tightening the money causes the economy to cool
and inflation to be tamed. For example, at the start of 1994, the economy of the
United States was beginning to heat up and inflation rebounding. In order to suppress
the swelling inflation, the Federal Reserve raised the rate of federal funds, which is
the interest rate of overnight lending between commercial banks, seven times from
February 4, 1994, to February 1, 1995, from 3% to 6%. This movement effectively
suppressed the increasing prices and made the actual rate of economic growth stabilize
at around 2.5%. And