When the Federal Reserve System begins once again purchasing Treasury securities, we will need to decide what maturities to purchase. Given how far out of step the System’s current portfolio is from common benchmarks, however, it might make sense to weight those purchases more heavily toward Treasury bills and other shorter-dated Treasury securities for a time.
Further into the future, there may be good reasons to shift toward greater holdings of shorter-term securities to provide greater flexibility. However, I want to emphasize that I do not expect this issue to be addressed for some time. Conclusion The most likely path for the economy appears to have softened against a backdrop of greater downside risks.