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Bernanke to Outline Fed Exit Strategy in Testimony

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Bernanke to Outline Fed Exit Strategy in Testimony

Federal Reserve Chairman Ben Bernanke is expected on Wednesday to outline the U.S. central bank’s strategy for tightening monetary policy once it is confident in the strength of the economic recovery.

The Fed chairman’s prepared testimony will be released at 10 a.m. EST, even though the congressional hearing where he was due to testify has been postponed.

The Fed cut interest rates to near zero in December 2008 and further eased financial conditions by putting in place an array of liquidity and long-term asset purchase programs.

Much is at stake in how and when the Fed decides to wean the economy and markets off its extraordinary support, and the timing and the sequencing of the steps is subject to much market speculation.

Central to the Fed’s strategy will be its ability to pay interest on the excess reserves it amassed during the crisis as its balance sheet grew by more than $1 trillion.

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