Actions to foster maximum employment and price stability

In addition, the Federal Reserve implemented a number of programs designed to support the liquidity of financial institutions and foster improved conditions in financial markets. These programs led to significant changes to the Federal Reserve’s balance sheet.

While many of the crisis-related programs have expired or been closed, the Federal Reserve continues to take actions to fulfill its statutory objectives for monetary policy: maximum employment and price stability. Over recent years, many of these actions have involved substantial purchases of longer-term securities aimed at putting downward pressure on longer-term interest rates and easing overall financial conditions.

The tools described in this section can be divided into three groups. The first set of tools, which are closely tied to the central bank’s traditional role as the lender of last resort, involve the provision of short-term liquidity to banks and other depository institutions and other financial institutions. The traditional discount window, Term Auction Facility (TAF), Primary Dealer Credit Facility (PDCF), and Term Securities Lending Facility (TSLF) fall into this category. Because bank funding markets are global in scope, the Federal Reserve also approved bilateral currency swap agreements with several foreign central banks. The swap arrangements assist these central banks in their provision of dollar liquidity to banks in their jurisdictions.