On May 15th 2001, the Federal Reserve policymakers cut interest rates by half a percentage point. This cut, however, only "seesawed- the United States stock markets, "after the announcement and were little changed at the closing bell."" according to CNN Money.( Fed Cuts Rates ½ point.).
On the dawn of the terrorist attacks on September 11th 2001, the Federal Reserve yet again cut interest rates half a percentage point on September 17th 2001. This was also in an effort to boost the United States economy, as well as the stock market in light of, "the worst terrorist attacks ever against the United States.""(Feds Cut Rates Again) This half a percentage point tax cut, being the eighth for the year, was announced an hour before the U.S. stock market reopened after a four-day close, their longest since the Great Depression. In a statement the Federal Reserve policymakers said, "They will continue to supply unusually large volumes of liquidity to the financial markets -(Fed Cuts Rates Again.) Since the Federal Reserve "sets the tone- because of its interest rate policy and its control over bank reserves, the level of liquidity is in part due to policies made by the Federal Reserve. .
It is noticed, therefore, "that a reduction in liquidity growth occurred when the Federal Reserve hiked short-term interest rates, and did not actively promote the money supply growth in 2000."" (Steve Saville) Because of the aforementioned, further efforts to try and increase the volumes of liquidity were introduced. In addition, reduced liquidity leads to lower asset prices, which in turn leads to further reduction in liquidity, therefore an increase in the volumes of liquidity will help, restore stock market functioning.
With an already struggling economy, the terrorist attacks of September 11th 2001 confirmed that the United States was in a recession. The U.S. unemployment rate skyrocketed.