Plosser 's Perspective
From bank failures to the recession, The Federal Reserve under Ben Bernanke has taken unprecedented actions over the past year.
Now the Obama administration and Congress are working together to determine the future of the central bank and it's potential role as a super-regulator.
Maria Bartiromo's spoke to Charles Plosser, President of the Federal Reserve Bank of Philadelphia in an exclusive interview to address all these issues. Read a complete transcript of Maria Bartiromo’s exclusive interview here.Fed's Exit Strategy
Our central bank has taken extraordinary steps in the past year to ensure the stability of our financial system. The big question: What is the Fed’s exit strategy as we recover from the recession?
Plosser said it’s actually quite simple. "We have to begin to pull back from our extraordinary programs. We have to begin to shrink our balance sheet; otherwise we will fuel inflation in the months and years ahead."
While Plosser doesn't see inflation as a problem just yet, he added that an improperly executed exit strategy might fan the flames of inflation in the next year or two. Plosser also raised the prospect of higher rates saying, "That may mean raising interest rates very rapidly at least as aggressively as we cut interest rates when the time is right."
Plosser would not give us a time frame for his call, he said it will depend on how the economic recovery takes shape.