The program is called an overnight fixed-rate reverse repurchase facility. Under the program, which the Fed started in September, the Fed lends bonds from its large holdings of Treasury securities in exchange for cash from eligible financial firms. Policymakers can change the interest rate offered on this tool, effectively setting a floor for short-term interest rates.

Market participants have been watching this program closely because it could be an important tool used by the Fed when it eventually starts raising short-term interest rates.

The Fed announced at the conclusion of its January policy meeting that officials voted to extend the program by another year and raise the limit on how much business banks and other trading partners could do with the facility each day to $5 billion each, up from $3 billion. The release noted that officials expected that allotment cap to increase further in coming months. The New York Fed is authorized to set a rate on these transactions between zero and 0.05%.

Minutes from the Fed's Jan. 28-29 meeting suggested the Fed saw a significant expansion over time to potentially unlimited size and gave Ms. Yellen wide berth to make decisions about how to run it. Ms. Yellen was sworn in as chairwoman Feb. 1.

'The Chair of the FOMC would authorize any changes in the offered rate or per-counterparty bid limit. Adjustments to the bid limit would be made in gradual steps, and the Committee would be consulted before the exercise would move to full allotment,' the minutes said.

This discretion appears to have led two officials--Dallas Fed President Richard Fisher and Philadelphia Fed President Charles Plosser--to vote against the changes to the program. The duo 'dissented because of their preference for retaining a cap on the maximum size of counterparties' offers during the extension,' the minutes said. Mr. Plosser also wanted a shorter extension. Mr. Fisher and Mr. Plosser declined through spokespeople to elaborate on their reasons for objecting to the program changes.

It was unclear from the minutes whether Fed officials would have to vote to completely eliminate the cap on bid size or merely be given a chance to discuss the move. A Fed spokeswoman declined to comment. If the Fed were to use the facility to manage short-term rates, there would be no limit on how much a trading partner could lend the Fed as the program is envisioned.

Most Fed officials aren't in a hurry to raise short-term rates, but the decision to loosen the constraints on the testing of it underscore how promising many Fed officials see in the tool. It could potentially allow the Fed to control interest rates without having to drain the trillions of dollars of reserves in the banking that would need to be removed to pinpoint precisely manage the level of the fed funds rate, the traditional lever by which the central bank has managed short-term rates and which moves in relation to bank reserves.