*  *  *  Since July, when I last reported to you on the conduct of monetary policy, the U.S. economy has gone through a period of considerable strain, with output contracting for a time and unemployment rising.
We in the Federal Reserve System acted vigorously to adjust monetary policy in an endeavor both to limit the extent of the downturn and to hasten its completion. Despite the disruptions engendered by the terrorist attacks of September 11, the typical dynamics of the business cycle have re-emerged and are prompting a firming in economic activity.