Federal Reserve role in US Economy

The attacks on the World Trade Center five years ago were aimed at the financial centre of the world economy. Many of the world's most important financial markets were located in or near the World Trade Centre. All the markets got huge losses from this disaster. The cost to the economy as a whole appeared to be much higher. Business and consumer confidence fell sharply.

Within a year the US economy was on the path to recovery. Fed Reserve and US central bank responded to disaster quickly, it ensured there was no financial disruption and it cleared the problems in financial functioning.

As soon as financial markets reopened, the Fed cut interest rates by half a percentage point. Before the end of 2001 two further cuts of a similar magnitude followed. Yet more cuts took rates down to a 50-year low of 1% by 2003. Fed reserve also launched housing boom.
It played a vital role in taking economy in the right path.