The Federal Reserve said Friday it will resume buying bonds in the open market, while extending its overnight repo operations until at least January, in order to assist bank lending markets and support system reserves.
The Fed said it will starting buying around $60 billion in Treasury bonds each month, until at least the second quarter of next year, and extend its overnight repo operations, which had been due to end on November 4, until January 2020.
"These actions are purely technical measures to support the effective implementation of the FOMC's monetary policy, and do not represent a change in the stance of monetary policy," the Fed said in a statement. "The Committee will continue to monitor money market developments as it assesses the level of reserves most consistent with efficient and effective policy implementation."
"The Committee stands ready to adjust the details of these plans as necessary to foster efficient and effective implementation of monetary policy," the statement added.
Benchmark 10-year bond yields rose to 1.746% following the Fed statement, while 2-year notes were seen at just under 1.6%, putting the slope of the so-called yield curve at around 15 basis points.
Fed Chairman Jerome Powell told the National Association for Business Economics conference in Denver earlier this week that the central bank planned to resume bond purchases in order to ease conditions in bank lending, but insisted that the move was "in no sense" a form of quantitative easing.
"I want to emphasize that growth of our balance sheet for reserve management purposes should in no way be confused with the large-scale asset purchase programs that we deployed after the financial crisis," Powell said.
"Neither the recent technical issues nor the purchases of Treasury bills we are contemplating to resolve them should materially affect the stance of monetary policy," he added.
That said, Minneapolis Federal Reserve Bank President Neel Kashkari said it was "worth analyzing the potential of yield curve control as yet another policy tool" during a Friday speech in New York, with a focus on shorted-dated maturities.
The Bank of Japan uses a similar technique, targeting a 10-year government bond yield of around 0%, while the European Central Bank uses quantitative easing to deliver an inflation rate that sits "close to but below" 2%.