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The Federal Reserve confronts a possibility it never expected: No exit.
By Ylan Q. Mui
Two years ago, top officials at the Federal Reserve mapped out a strategy for withdrawing the central bank’s unprecedented support for the American economy.
The official communiqué was titled “Policy Normalization Principles and Plans,” and it was supposed to serve as a rough outline for the tenure of newly installed Fed Chair Janet L. Yellen. Essentially, it consisted of two basic parts: Raise interest rates and shrink the central bank’s massive balance sheet.
But now, both of those steps are being called into question as Fed officials grapple with an economy that appears to be stuck in first gear. Instead of executing its exit strategy, the Fed is confronting the possibility that the dramatic measures it took to safeguard the recovery will remain in place indefinitely.
“Maybe this is one of those cases where you can’t go home again,” former Fed chairman Ben S. Bernanke wrote in a recent blog post arguing for a shift in course.
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Source: http://www.philosophers-stone.co.uk/?p=14374
