Federal Reserve policy makers

At that point, the Federal Reserve will be faced with two
problems. One will be to prevent the economic slowdown from
deepening. The other—and more serious—problem will be to
prevent a slowing in the rate of inflation, which is called disinflation,
from turning into deflation, an actual decline in
prices.
In the most recent recession, which ended in November of
2001, Federal Reserve policy makers were open about the threat
of deflation as they pushed Treasury interest rates lower and
lower. Their short-term interest rate target, which is the central
bank’s main tool for steering the course of the economy, got
down to 1 percent in June of 2003 and stayed there for a year. It
is likely that in the next recession, this rate will have to go below
1 percent.