The economic crisis has brought the Federal Reserve into uncharted territory, and policymakers will face varied challenges related to the Fed’s balance sheet and developing an exit strategy for ending the many new lending programs and draining liquidity as needed, Federal Reserve Bank of Philadelphia president Charles Plosser said yesterday.
“I have stressed that operating with the target federal funds rate near zero and using the Fed’s lending programs to implement policy pose some challenges for policymakers,” Plosser told an audience at the University of Delaware, according to prepared text of the speech released by the Fed. “Without the target funds rate as a nominal anchor, it will be important for us to develop relevant quantitative measures to assess the appropriate size and composition of the Fed’s balance sheet.”
