Plosser: Timing and Pace Are Key to Exit Strategy

When discussing the exit from monetary policy accommodation, the question isn’t whether the Fed has the tools — the more important aspects are the timing and the pace, Federal Reserve Bank of Philadelphia president Charles I. Plosser said Friday.

Calling the exit from an accommodative policy “very tricky,” Plosser told the Harrisburg, Pa., Regional Chamber and Capital Regional Economic Development Corp. that since “nontraditional actions” were used, this exit strategy will be more tricky.

“The question is not can we do it, but will we do it at the right time and at the right pace,” Plosser said, according to a prepared text of his remarks that was released by the Fed.

“Since monetary policy operates with a lag, the Fed will need to begin removing policy accommodation before unemployment has returned to acceptable levels,” he added. “It is imperative that we have the fortitude to exit as aggressively as necessary to prevent a spike in inflation and its undesirable consequences down the road.”

Perhaps most important, Plosser said, is having a plan and communicating it.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER