Before House, Bernanke Admits Having No QE Exit Plan

‘We haven’t done a new review of the exit strategy yet. I think we will have to do that sometime soon’

Fed Could Slow Bond Selloff (Wall Street Journal)

Bernanke Says Central Bank Will Review Its Mortgage-Backed Securities Exit Plan

WASHINGTON—The Federal Reserve is potentially years away from ending its easy-money policies and tightening credit, but Chairman Ben Bernanke said central bank officials could alter their strategy for what to do when that time comes.

Testifying on Capitol Hill Wednesday, Mr. Bernanke said the Fed could decide to sell its mortgage-backed securities more slowly than previously planned, or even avoid selling them altogether and instead allow them to mature.

In June 2011, the Fed had said its exit strategy would be to sell off those securities over a period of three to five years, after the central bank started raising short-term interest rates.

"We haven't done a new review of the exit strategy yet. I think we will have to do that sometime soon," Mr. Bernanke said. He added that a slower sales strategy meant it could take an extra year for the Fed to reduce the size of its holdings when the time comes.

A possible slower-selling strategy might be taken as good news by investors, since aggressive sales could disrupt these markets. It might also help the Fed avoid selling its holdings at a loss.

"We're quite comfortable that we can exit in a way that is both smooth and in which we provide lots of information to markets in advance, so they will know what's coming and be able to anticipate," Mr. Bernanke said.

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