"A precursor to an exit must be to slow and then halt the continued expansion of the balance sheet"
- Fed President Charles Plosser
The Federal Reserve is likely to announce a slowdown of its monthly bond purchases as soon as its next policy meeting, Philadelphia Fed President Charles Plosser said Tuesday. Currently, the Fed is buying $85 billion per month of Treasury and mortgage-backed securities in order to revive growth in the world's largest economy. However, policy makers are already thinking on how to slow and then halt bond purchases when it is time to exit from quantitative easing efforts. During the last six month, payrolls have almost doubled and reached average of 208,000 in the last six months, the employment rate has come down, while the average duration of unemployment has fallen as well, indicating that measures done by the Fed are boosting closely-watched labour market.
"A precursor to an exit must be to slow and then halt the continued expansion of the balance sheet. This would not necessarily indicate that increases in the policy rate were imminent. Rather, it would indicate that efforts to increase accommodation were coming to a close," Plosser said.
"While that would not impair the Fed's ability to implement monetary policy, it would certainly be noticed, especially at a time when the federal government and the public are keenly focused on the need to reduce deficits".
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