Plosser Says Fed Shouldn’t Use Balance Sheet as Regular Tool

Federal Reserve Bank of Philadelphia President Charles Plosser said the Fed shouldn’t regularly use its balance sheet to conduct monetary policy because such moves threaten its independence.

“Our balance sheet should not be viewed as a new independent instrument of monetary policy in normal times,” Plosser said in the text of a speech in Paris today. “Clear boundaries and resisting the use of the balance sheet as a new policy tool would also improve fiscal discipline by making it more difficult for the fiscal authorities to resort to the printing press as a solution to unsustainable budget policies.”