President Charles Plosser of the Federal Reserve Bank of Philadelphia said during a speech on Wednesday that the Federal Reserve needs to scale back its quantitative easing program and stop it before the end 2013.
With interest rates hitting extreme lows and the Fed’s balance sheet continuing to expand, the current easy-money polices are posing risks to the economy in terms of financial stability, the Philadelphia Fed president stated.
"We also do not know whether the Fed's growing presence in the market for mortgage-backed securities will distort the functioning of this market in the longer run. But with the large volume of purchases the Fed is making, this possibility needs to remain on our radar screen," Plosser said.
The Federal Open Market Committee announced that it will continue its $85 billion in monthly purchases of Treasuries and MBS, which is aimed at boosting economic growth and reducing unemployment.