Fed's easy policy faces real test when it's time to exit: Fisher

EL PASO, Tex. (Reuters) - The Federal Reserve's unprecedented effort to ease monetary policy will face its biggest test when it comes time to withdraw the policy accommodation, a top Fed official said on Wednesday.

Once the economy begins to grow more quickly and banks start lending out more of the money that they now hold on the sidelines, "We are going to have to titrate or taper back the way that money flows back into the system," Dallas Fed President Richard Fisher said at the University of Texas at El Paso.

If the Fed fails to do so at the right rate, inflation could start to take hold, he warned.

Fisher repeated his view that he would not favor an immediate end to the Fed's asset purchases, but wants an end to them because they are less effective than they were at the beginning. He said and his colleagues at the Fed last month had a "serious discussion" about when and whether to taper bond buys.

(Reporting by Ann Saphir; Editing by Leslie Adler)

Source: http://news.yahoo.com/feds-easy-policy-faces-real-test-time-exit-222415813--business.html

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