Bernanke Points to the Exit

Signs pointing to the exit from quantitative easing are now clear. Federal Reserve Chairman Ben S. Bernanke outlined the central bank's strategy to begin soaking up the unprecedented liquidity in the U.S. financial system in his semiannual Humphrey-Hawkins testimony to Congress on July 21. The Fed's strategy will focus on raising interest rates, particularly the rate the Fed pays on reserve balances held by depository institutions. Bernanke said the Fed could also remove liquidity from the system through reverse repurchase agreements—selling securities held by the Fed with an agreement to buy them back later.

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