have been otherwise. in addition, by removing substantial quantities of longer - term treasury securities from the market, the fed ’ s purchases induced private investors to acquire other assets that serve as substitutes for treasury securities in the financial marketplace, such as corporate bonds and mortgagebacked securities. by this means, the fed ’ s asset purchase program – like more conventional monetary policy – has served to reduce the yields and increase the prices of those other assets as well. the net result of these actions is lower borrowing costs and easier financial conditions throughout the economy. 2 we know from many decades of experience with monetary policy that, when the economy is operating below its potential, easier financial conditions tend to promote more rapid economic growth. estimates based on a number of recent studies as well as federal reserve analyses suggest that, all else being equal, the second round of asset purchases probably lowered longer - term interest rates approximately 10 to 30 basis points. 3 our analysis further indicates that a reduction in longer - the federal reserve ’ s recently completed securities purchase program has changed the average maturity of treasury securities held by the public only modestly, suggesting that such an effect likely did not contribute substantially to the reduction in treasury yields. rather, the more important channel of effect was the removal of treasury securities from the market, which reduced treasury yields generally while inducing private investors to hold alternative assets ( the portfolio reallocation effect ). the substitution into alternative assets raised their prices and lowered their yields, easing overall financial conditions. studies that have provided estimates of the effects of large - scale asset purchases, holding constant other factors, include james d. hamilton and jing ( cynthia ) wu ( 2011 ), “ the effectiveness of alternative monetary policy tools in a zero lower bound environment, ” nber working paper series no. 16956 ( cambridge, mass : national bureau of economic research, april ), and journal of money, credit and banking ( forthcoming ) ; arvind krishnamurthy and annette vissing - jorgensen ( 2011 ), “ the effects of quantitative bis central bankers ’ speeches term interest rates of this magnitude would be roughly equivalent in terms of its effect on the economy to a 40 to 120 basis point reduction in the federal funds rate. in june, we completed the planned purchases of $ 600 billion in longer - term treasury securities that the committee initiated in november, while continuing to reinvest the proceeds of maturing or redeemed longer - term securities in treasuries. although we are no longer expanding our securities holdings,

we will be monitoring developments in the labor market closely. once the temporary shocks that have been holding down economic activity pass, we expect to again see the effects of policy accommodation reflected in stronger economic activity and easing on interest rates ( pdf ), ” working paper ( evanston, ill. : kellogg school of management, northwestern university, june ) ; stefania d ’ amico 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 ) ; joseph gagnon, matthew raskin, julie remache, and brian sack ( 2011 ), “ large - scale asset purchases by the federal reserve : did they work? ( pdf ) ” federal reserve bank of new york, economic policy review, vol 17 ( may ), pp. 41 – 59 ; and eric t. swanson ( 2011 ), “ let ’ s twist again : a high - frequency event - study analysis of operation twist and its implications for qe2 ( pdf ), ” working paper series 2011 – 08 ( san francisco : federal reserve bank of san francisco, february ), and brookings papers on economic activity ( forthcoming ). see hess chung, jean - philippe laforte, david reifschneider, and john c. williams ( 2011 ), “ have we underestimated the likelihood and severity of zero lower bound events? ( pdf ) ” working paper series 2011 – 01 ( san francisco : federal reserve bank of san francisco, january ). bis central bankers ’ speeches job creation. however, given the range of uncertainties about the strength of the recovery and prospects for inflation over the medium term, the federal reserve remains prepared to respond should economic developments indicate that an adjustment in the stance of monetary policy would be appropriate. on the one hand, the possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might reemerge, implying a need for additional policy support. even with the federal funds rate close to zero, we have a number of ways in which we could act to ease financial conditions further. one option would be to provide more explicit guidance about the period over which the federal funds rate and the balance sheet would remain at their current levels. another approach would be to initiate more securities purchases or to increase the average maturity of our holdings. the federal reserve could also reduce the 25 basis point rate of