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Fed May Overhaul Plan to Exit Stimulus

As balance sheet gets bigger, the risks in unwinding it increase.

By Craig Torres and Josh Zumbrun, Bloomberg | Updated on December 07, 2012

A decision by the Federal Reserve to expand its bond buying next week is likely to prompt policy makers to rewrite their 18-month-old blueprint for an exit from record monetary stimulus.

Under the exit strategy, the Fed would start selling bonds in mid-2015 in a bid to return its holdings to pre-crisis proportions in two to three years. An accelerated buildup of assets would also mean a faster pace of sales when the time comes to exit — increasing the risk that a jump in interest rates would crush the economic recovery.

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