At the beginning of the year, many Fed officials, including Chairman Ben Bernanke, thought one of the biggest risks was that the economy might grow stronger than expected. At the time, the Fed's key interest rate was at 5.25%, and the central bank was leaning toward raising it further, rather than easing monetary policy. "My recommendation also is to take no action and to maintain a bias toward further tightening," Bernanke said at the first meeting of the year, noting that inflation risk had picked up and the housing market had shown some improvement after slumping in 2006. "The housing market has looked a bit more solid, and the worst outcomes have been made less likely," he said. At that point, they didn't realize that losses from subprime
