First, it was fixated on the high and persistent unemployment rate and did its best to bring it down by trying to encourage investment. It signaled that it would keep rates low for a sustained period and offered the Greenspan put if firms were still not convinced. Critics should recognize that this fixation was in full accord with its mandate and, more important, that there would have been political hell to pay if it had raised interest rates much earlier than it did.
The Fed was focused on job growth and even feared deflation (rather than worried about inflation), and would have been extremely politically unpopular to raise interest rates more aggressively and earlier.
