There is little historical evidence that the maturity structure of the U.S. debt is an important macroeconomic variable.  Any effects from the twist operation were probably minor.

Growth in 2013 will pick up from this year’s pace, while the risks associated with the central bank’s new asset-purchase program will be "manageable," Lockhart told reporters after the speech. The district bank chief said he would like to examine the state of the economy before deciding what policy would be appropriate once Operation Twist ends.

As reported by Bloomberg News

[A]mong the many cross-currents and uncertainties facing the U.S. economy, the most important one is the continued uncertainty emanating from the European situation.

"If things slow down a lot more and the U.S. economy looked like either that it was going into recession or that deflation would develop, then I think we could consider more action, but I don't think we are there at this juncture," Bullard told reporters after the conference,

"Twist has been extended through the end of the year, but we are running out of balance sheet. There is a limited amount of short-term Treasuries that we can sell and buy long-term Treasuries. So I don't think you can look at any more extension of Twist beyond the end of the year."

"There’s a limit to what we can do without distorting the marketplace."

"The real question is: Where does it start to interfere with the way that markets allocate securities?"

"My suspicion is Operation Twist is having a very minor effect” and “the costs exceed the benefits. That’s why I personally didn’t support the program."

“One threshold [for another round of asset purchases] for me, in my own thinking, would be if we see economic growth slow to the point where we’re not seeing further progress in bringing the unemployment rate down,” Williams said today on a panel in Beverly Hills, California. Stimulus might also be needed if inflation dropped “significantly” below the Fed’s 2 percent goal, he said. 

Those aren’t “the circumstances I currently expect,” said Williams, who votes on the policy-setting Federal Open Market Committee this year. If additional rounds of bond buying are warranted, the Fed may purchase more mortgage-debt, or extend its program to push out the average-maturity of its holdings, dubbed Operation Twist, he said.

Some of the staff work that calibrates the economic impact of the Federal Reserve’s balance sheet policies assumes that the effects on yields and financial conditions are driven by the amount of ten-year equivalents that the Fed takes into its portfolio.

By that metric, the effect of the Maturity Extension Program is about equal in size to that of the large-scale asset purchase program that ended in June of this year (what we have referred to as LSAP2). This fact was highlighted in a recent post to the Liberty Street Economics blog.⁴ In both cases, the effect of the program was to remove about $400 billion of 10-year equivalents from the market.

Third, the program requires the Desk to actively sell Treasury securities maturing over the next three years. This element of the program was not intended to put upward pressure on shorter-term Treasury yields. Indeed, with the FOMC indicating that it anticipates that economic conditions are likely to warrant the current level of the federal funds rate through mid-2013, I would have expected the 2-year Treasury yield to remain well anchored. However, there has been some modest upward pressure on the 2-year Treasury yield since the FOMC meeting—a development that the Desk will continue to monitor.

Nonetheless, it is worth noting that the scale of the maturity extension program is necessarily limited by the amount of our holdings of shorter-term securities; furthermore, purchasing a very large proportion of the outstanding stock of longer-term Treasury securities could potentially have adverse effects on market functioning. Thus, securities purchases across a wide spectrum of maturities might become appropriate if evolving economic conditions called for significantly greater monetary accommodation.

“It is reasonable to wait and see how the Twist policy affects the economy,” Bullard said, referring to September’s so-called Operation Twist measure. “Given that the tone of the data has been better, you want to get into next year” before you consider more action.

The factors likely to be restraining growth — from empty houses to prospective tax rates — are nonmonetary and largely beyond the power of the central bank to offset through easier monetary conditions. History has repeatedly demonstrated that if a central bank attempts to add monetary stimulus to offset nonmonetary disturbances to growth, the result is higher inflation that can be difficult and costly to eliminate. This is why I opposed the Maturity Extension Program — popularly known as "Operation Twist" — in which the Fed will buy long-term Treasury securities and simultaneously sell short-term Treasury securities. The effect of these operations is uncertain, but likely to be relatively small. My sense is that the main effect will be to raise inflation somewhat rather than increase growth.

Based on our experience with Operation Twist in the 1960s and with last year’s QE2, the reduction in long-term rates from our actions in September is likely to be less than 20 basis points for the 10-year Treasury yield, which is currently only 2 percent. The pass-through to the rates at which consumers and businesses actually borrow is likely to be considerably less. Thus, I am skeptical that this will do much to spur businesses to hire or consumers to spend, given the ongoing adjustments occurring in the economy and the uncertainties posed by the fiscal challenges both here and abroad.

SEN. CASEY: I have two questions on that. Number one is, as a result of that -- the implementation of that policy, how much of a decline in long- term interest rates would you expect?

MR. BERNANKE: Well, we would expect something on the order of 20 basis points, approximately. We see this as being roughly approximately equal to something like a 50-basis-point cut in the federal funds rate. In that respect, it's a significant step but not a game changer in some respects.

SEN. CASEY: And in terms of the intended or hoped-for economic boost from that, what's your sense of that? How can you assess that?

MR. BERNANKE: Well, we think this is a meaningful but not an enormous support to the economy. I think it will provide some additional monetary policy accommodation. It should help somewhat on job creation and growth. It's particularly important now that the economy is close -- the recovery is close to faltering. We need to make sure that the recovery continues and doesn't drop back and that the unemployment rate continues to fall downward.

So I don't have a precise number, but I would just put it as a moderate support, not something that is expected to radically change the picture, but what should be helpful both in keeping prices near the price stability level but also providing some support for growth.

From the Q&A session

I dissented from these decisions because I believe that they will do little to improve the near-term prospects for economic growth or employment and they do pose risks. Policy actions should never be considered free and should be evaluated based on the costs and benefits. Based on our experience with Operation Twist in the 1960s and with last year’s QE2, the reduction in long-term rates is likely to be less than 20 basis points for the 10-year Treasury yield, which is currently only 2 percent. The pass-through to the rates at which consumers and businesses actually borrow is likely to be much less. Thus, I am skeptical that this will do much to spur businesses to hire or consumers to spend, given the ongoing structural adjustments occurring in the economy and the uncertainties posed by the fiscal challenges both here and abroad.