Reply #13: Fed Must Have ‘Exit Strategy’ for Loan Programs, Yellen Says [View All]

[Demeter]

http://www.bloomberg.com/apps/news?pid=20601087&sid=abm7qDvy4P58&refer=home#

By Vivien Lou Chen

Jan. 4 (Bloomberg) -- Federal Reserve Bank of San Francisco President Janet Yellen said the U.S. central bank must have a “timely” plan for ending lending programs created since the start of the global financial crisis.

“Many of the interventions are novel, so no straightforward methods are available to quantify their effectiveness,” Yellen said in remarks prepared for a speech today in San Francisco. “The Fed must ensure that it has an exit strategy to wind down the facilities in a timely and effective way when they are no longer needed.”

Fed Chairman Ben S. Bernanke has created more than $2 trillion of emergency lending programs since December 2007, using the Fed’s balance sheet and money-creation authority to cushion the economy from the credit crunch. Yellen’s remarks come less than three weeks after Fed policy makers cut the federal funds rate, or the rate banks charge one another for overnight loans, to as low as zero for the first time. The central bank also shifted its focus to the amount and type of debt it buys...