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Money and Financial Markets

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At least since Walter Bagehot’s day in the late 1800s, the classic advice to central banks in real or incipient financial crises has been to “lend freely”—in modern parlance, to supply liquidity. After the events of September 11, the Federal Reserve, already providing a fair amount of liquidity in the face of a slowing economy, redoubled its efforts. A growing demand for liquidity was apparent in the money-supply numbers, which showed large gains in September: M2 increased at an annual rate of 12.0%, and the broader M3 aggregate increased at an annual rate of 12.84%.

Suggested citation: "Money and Financial Markets," Federal Reserve Bank of Cleveland, Economic Trends, no. 01-10, pp. 05-07, 10.01.2001.

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