And in circumstances when market functioning is unusually strained, as was the case prior to the Fed’s first LSAP program, asset purchases may enhance liquidity through the central bank’s consistent and significant presence in the market. Over the past six years, the FOMC has been flexible in using these tools, adapting as it learned and as individual circumstances changed. In the first two LSAP programs and MEP, for example, the FOMC communicated an expected total size and completion date for each program. However, the third (and current) LSAP program has been outcome-based, with the FOMC announcing only a monthly pace and composition for its purchases and noting that purchases would continue until there is a substantial improvement in the outlook for the labor market in a context of price stability. Other central banks have also used conditional asset purchases effectively. Perhaps the best example is the Outright Monetary Transactions program announced by the European Central Bank (ECB) in September 2012. This program is credited with helping to stabilize euro-area fixed income markets by ruling out certain bad equilibria. This success was achieved without the purchase of a single asset. Another example of conditional asset purchases is the BoJ’s statement of a commitment to continue QEP until inflation registered stably at or above zero. Changes in the Fed’s balance sheet and implications for normalization So where are we now? The current purchase program appears to be nearing its completion.
As the U.S. economy continues to grow and expand—as I expect it will—your personalized customer service, commitment to relationship banking, and adaptability to technological advances will serve you and your communities well. I will miss many aspects of my role at the New York Fed, particularly the opportunities I’ve had to interact with the community bankers in our district. Please enjoy today’s conference, and thank you for coming. 1 Sumeet Batra, Richard Ciccotelli, and Jacqueline Fenton assisted in preparing these remarks. 2 See William C. Dudley, The Importance of Incentives in Ensuring a Resilient and Robust Financial System,  March 26, 2018. 3 Keeton, William & Kahn, George A. & Schroeder, Linda & Weiner, Stuart E., 2003. “The role of community banks  in the U.S. economy,” Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 15–43. 2/2  BIS central bankers' speeches