Thursday, February 18, 2010

Politi: Bernanke reveals strategy to rein in stimulus measures

"...“The economy continues to require the support of accommodative monetary policies,” said Mr Bernanke. “However, we have been working to ensure that we have the tools to reverse, at the appropriate time, the currently very high degree of monetary stimulus.”

Mr Bernanke did not reveal a timeline for policy change, but did propose the likely sequence of events. The Fed would initially use two techniques – “reverse repurchase agreements”, under which it sells assets for cash with an agreement to buy them back, and a “term deposit facility”, a kind of certificate of deposit for banks.

The Fed has been conducting limited tests of “reverse repos” in recent months. It intends to begin tests on the term deposit facility in the spring..."

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