The Federal Reserve's Response on the Financial Crisis, Reaction and Recovery

Book excerpt: Since its establishment in 1913, the Federal Reserve has an important role in the economy.Most recently the role of the Fed, as a lender of last resort, was crucial for dealing with the breakdown of the U.S. monetary and credit system during the Financial Crisis in 2007/08.After cutting interest rates close to zero, they implemented further special programs to fill the market with sufficient liquidity and to improve and strengthen the financial market's conditions and creditworthiness. In December 2015 the Fed raised for the first time after the Great Recession the federal funds rate. But threats of new tariffs on China by President Donald Trump created new risks for the markets and raised concerns of a recession, putting the Federal Reserve in a tough position.