Federal Reserve Bank of Philadelphia President Charles Plosser "Offers His Design for an Exit Strategy" in a speech Friday. He says, "Our traditional instrument of monetary policy -- the federal funds rate -- has been near zero for more than two years and is controlled within a range but not precisely. The Fed's balance sheet is nearly three times as large as it was before the crisis, and it is heavily weighted toward long-term Treasuries and mortgage-related assets. Although recent global events have created some uncertainties, the apparent strengthening of the U.S. economy suggests it is prudent for policymakers to develop a strategy for the normalization of monetary policy. Today I want to suggest such a strategy.... If this forecast is broadly accurate, then monetary policy will have to reverse course in the not-too-distant future and begin to remove the massive amount of accommodation it has supplied to the economy. Failure to do so in a timely manner could have serious consequences for inflation and economic stability in the future.... The first element of the plan to exit and normalize policy would be to move away from the zero bound and stop the reinvesting program and allow securities to run off as they mature. Thus, we would raise the interest paid on reserves from 25 basis points to 50 basis points and seek to achieve a funds rate of 50 basis points rather than the current range of 0 to 25 basis points."

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