The economy was slow to respond to the Federal Reserve Board's money- tightening policies last year, and banks may bear part of the blame, according to Federal Reserve Board Governor Janet Yellen.

After the Fed raised interest rates seven times for a total of 300 basis points between February 1994 and February 1995, the agency expected high consumer demand to cool off, easing any potential inflationary pressures. But the economy continued to accelerate through the end of 1994.

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