To make financial conditions more supportive of economic growth, the Federal Reserve has purchased large amounts of longer-term securities in recent years. The Fed's resulting securities portfolio has generated substantial income but may incur financial losses when market interest rates rise....

Inflation has risen of late, reflecting higher prices for many commodities. The inflation rate is likely to peak around the middle of 2011 and then return to an annual level of about 1¼ to 1½%. A sustained period of high inflation is very unlikely and the Fed will act quickly and decisively to...

The Federal Reserve's current large-scale asset purchase program, dubbed "QE2," has a precedent in a 1961 initiative by the Kennedy Administration and the Federal Reserve known as "Operation Twist." An analysis finds that four of six potentially market-moving Operation Twist announcements had...

Economics education faces a challenge in keeping up with the changes that have swept through monetary policy in recent decades. Many central banking innovations, such as interest on reserves and large-scale asset purchases, aren't adequately treated in standard textbooks. The letter is adapted...

Federal Reserve announcements of future purchases of longer-term bonds may affect asset prices by changing market expectations of the future supply of targeted securities. Such announcements may also affect asset prices by signaling that the stance of conventional monetary policy is likely to...

Researchers have made great strides in improving our understanding of the effects of unconventional monetary policy. Although further study is needed, the evidence from the past few years demonstrates that both forward guidance and large-scale asset purchases are useful policy tools when...

The primary reason unemployment remains high is a lack of demand. An aggregate demand shortfall is exactly the kind of problem monetary policy can address. Thus, we need powerful and continuing monetary stimulus to move toward maximum employment and price stability. ; This letter is adapted from...

States that were hit hard by the housing bust performed worse economically during the recession of 2007-09. However, the close relationship between the fall in home prices and state economic activity has largely disappeared during the recovery. High unemployment, restrained demand, and idle...

The Federal Reserve has taken bold steps this past year, both in the approaches to stimulate the economy and the way it talks about policy. The Fed's initiatives are working, and represent the best course to move toward maximum employment and price stability. ; This letter is adapted from a...