One way to examine the composition of assets on the Fed's balance sheet is to group them according to the objectives of the programs used to acquire them.

The recent behavior of key fiscal policy variables draws some parallels with the U.S. experience in the Civil War and the two world wars. A specific concern is the possibility of high inflation to finance the accumulated debt.

Despite U.S. fiscal problems, the Fed appears to still retain excellent inflation credibility with financial markets… Although confidence in the Fed might explain the quiescence of inflation expectations, the structure of U.S. government debt may be more important… [I]nflating away the U.S....

Given the size of the underlying markets, cutting the cost of capital to firms and households by reducing the yields required on long-term corporate bonds and mortgages is a key policy objective.

The housing market crisis is the latest reminder that asset prices can and do run wild at rates capable of negative effects on real economic activity. Not surprisingly, this has reinvigorated debate over whether central banks should respond to asset price bubbles.

In contrast, most economists believe that central banks have little or no ability to directly affect employment. The effect of monetary policy actions on employment is indirect and stems from central banks’ ability to affect output growth in the short run and achieve price stability in the...

Monitoring of prices is essential lest future adjustments be misunderstood by the public as part of the dynamics of aggressive monetary policy.

Large-scale asset purchases may have limited power to raise TIPS-implied inflation expectations—something that might appeal to policymakers fighting deflation.

With the funds rate driven to levels far below its target, the FOMC had no recourse but to adjust the target accordingly.

The FOMC’s “mandate-consistent inflation rate” is generally judged to be “about 2 percent or a bit below.”