Philadelphia Federal Reserve Bank president Charles Plosser this week said he sees no near-term inflation threat, but warned the large volume of excess reserves created by the Fed as a result of its quantitative easing policy could become inflationary if those reserves start flowing rapidly into the economy.

In that event, Plosser said, the Fed would need to act “pretty quickly” to head off an inflation problem — either by raising interest rates or by draining reserves.

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