“ the term structure of interest rates, ” quarterly journal of economics, vol. 71 ( november ), pp. 485 – 517. d ’ amico, stefania, and thomas b. king ( 2010 ). “ flow and stock effects of large - scale treasury purchases, ” finance and economics discussion series 2010 - 52. washington : board of governors of the federal reserve system, september. gagnon, joseph, matthew raskin, julie remache, and brian sack ( 2010 ). “ large - scale asset purchases by the federal reserve : did they work? ” federal reserve bank of new york staff reports 441. new york : federal reserve bank of new york, march. hamilton, james d., and jing ( cynthia ) wu ( 2011 ). “ the effectiveness of alternative monetary policy tools in a zero lower bound environment, ” working paper. san diego : university of california, san diego, february. joyce, michael, ana lasaosa, ibrahim stevens, and matthew tong ( 2010 ). “ the financial market impact of quantitative easing, ” working paper 393. london : bank of england, july ( revised august ). modigliani, franco, and richard sutch ( 1966 ). “ innovations in interest rate policy, ” american economic review, vol. 56 ( march ), pp. 178 – 97. tobin, james ( 1958 ). “ liquidity preference as behavior towards risk, ” review of economic studies, vol. 25 ( february ), pp. 65 – 86. vayanos, dimitri, and jean - luc vila ( 2009 ). “ a preferred - habitat model of the term structure of interest rates, ” nber working paper series 15487. cambridge, mass. : national bureau of economic research, november. bis central bankers ’ speeches

debt. last august, the fomc announced that it would begin reinvesting principal payments on agency mbs and agency debt into longer - term treasury securities, and over the subsequent couple of months or so, the public remarks of federal reserve officials made note of the possibility of a further expansion of the portfolio. consequently, when the committee announced in early november that it intended to purchase an additional $ 600 billion in longer - term treasury securities, that decision was largely anticipated by financial market participants, and it occasioned only minimal market response. however, taken together the movements in longer - term interest rates that occurred between the august and november fomc meetings are strikingly similar to those on the prior announcement dates shown in the a burgeoning literature focuses on the experience with asset purchase programs of the federal reserve and other central banks ; for example, see d ’ amico and king ( 2010 ) ; gagnon and others ( 2010 ) ; hamilton and wu ( 2010 ) ; and joyce and others ( 2010 ). bis central bankers ’ speeches table, bolstering the judgment that these securities purchases contribute to more accommodative financial conditions. one complication that arises in evaluating the contribution of portfolio balance effects to the observed movements in longer - term rates is that news about large - scale asset purchases may also influence investors ’ perceptions regarding the likely path of short - term interest rates. such effects may not have been very important, however, when the fomc announced the expansion of its securities purchases in march 2009. as shown in figure 4, that announcement appeared to have only modest effects on the outlook of professional forecasters ( left panel ) and investors ( right panel ) regarding the likely trajectory of the federal funds rate. thus, the substantial decline in longer - term yields following this announcement appears to have mainly reflected the effect of the purchases in pushing down term premiums rather than a shift in the expected path of the funds rate. 5 this evidence suggests that the portfolio balance channel of influence is not only operative but also fairly large. that said, as we saw in figure 2, the expected path of the federal funds rate does appear to have flattened for a time during the late summer and early autumn of last year. even allowing for that change in near - term policy expectations, however, it seems reasonable to conclude that the announcement of additional securities purchases mainly affected financial conditions through the portfolio balance channel. to assess the macroeconomic effects of the fed ’ s large - scale asset purchase program,