In December 2008, the Federal Open Market Committee (FOMC) lowered the target for the federal funds rate to a range of 0 to 25 basis points. With its traditional policy instrument set as low as possible, the Federal Reserve faced the challenge of how to further ease the stance of monetary policy as the economic outlook deteriorated.
The Federal Reserve responded in part by purchasing substantial quantities of assets with medium and long maturities in an effort to drive down private borrowing rates, particularly at longer maturities.
These large-scale asset purchases (LSAPs) have greatly increased the size of the Federal Reserve’s balance sheet, and the additional assets may remain in place for years to come