WASHINGTON (Reuters) - The Federal Reserve on Wednesday unveiled a long-awaited plan to stop scaling back the vast portfolio of bonds it built up to spur an economic recovery from the 2007-2009 financial crisis and recession.

FILE PHOTO: DATE IMPORTED:March 20, 2019U.S. Federal Reserve Chairman Jerome Powell holds a news conference following the two-day Federal Open Market Committee (FOMC) policy meeting in Washington, U.S., March 20, 2019. REUTERS/Jonathan Ernst/File Photo

By September, the U.S. central bank said its current practice of allowing up to $50 billion of Treasuries and mortgage-backed securities (MBS) to roll off its balance sheet each month will come to an end if the economy evolves “about as expected.”

When completed the Fed would still likely have at least $3.5 trillion in bonds, more than four times the roughly $800 billion it had heading into the crisis more than a decade ago. The Fed currently holds about $3.8 trillion in bonds.

The announcement sets an end-date to a programmatic reduction in the balance sheet that got underway in the fourth quarter of 2017, when the Fed set out to retire one of the more controversial components of the tools it used to fight the crisis.

Moreover, it puts the central bank on a different footing just three months after Fed Chairman Jerome Powell upset markets by saying the bond-culling effort was on “automatic pilot.” Even U.S. President Donald Trump had weighed in on Twitter with calls to urge the Fed to stop shedding bonds.

LARGE CACHE

At its peak levels in 2015 and 2016, the Fed’s stash totaled roughly $4.25 trillion of Treasuries and MBS acquired through three rounds of purchases known as quantitative easing, or QE, that ran from December 2008 through 2014.

Slideshow ( 2 images )

The QE program was designed to stimulate the economy by flooding the financial system with cash and depressing long-term interest rates after the Fed had cut its benchmark short-term rate to near zero in December 2008.

The plan, awaited eagerly by investors who saw the portfolio reduction effort as one of the factors behind the wave of volatility that struck financial markets in late 2018, is a result of the Fed’s decision to use its large cache of securities to set the level of the fed funds rate, its primary tool for managing the economy.

U.S. officials now control the fed funds rate by paying banks interest on the $1.7 trillion in reserves they hold at the Fed and through other money-market transactions. Those reserves grew when the Fed created funds to purchase bonds after the crisis. Letting those reserves shrink too much could create price swings in short-term rates markets.

Wednesday’s announcement still leaves a number of questions unanswered. Among them:

* Whether or not the Fed should sell MBS in the future

* If the Fed will make changes in the money-market operations it uses to control rates

* Exactly what level of bank reserves the Fed will keep on its balance sheet

* If Fed policymakers prefer a portfolio of primarily shorter-term bonds

Should the Fed opt for a portfolio akin to its pre-crisis holdings of mostly short-term Treasuries, how it goes about getting rid of other bonds without roiling markets or the economy will be a delicate undertaking.

The Federal Reserve Bank of New York said it would announce more details on its market operations in May.