7 Instead, the FOMC used two unconventional tools: large-scale asset purchases and enhanced forward guidance. To varying extents, foreign central banks have also been using these tools. The Fed’s asset purchases did not have the conventional aim of increasing reserve balances to pull down short-term rates. 8 Rather, purchases of longer-term securities lowered longerterm yields through portfolio balance effects.
The evolution of our asset purchases reflected a learning process for policymakers. In the early programs, the FOMC specified the expected quantities of assets to be acquired over a defined period.