Federal Reserve Bank of Philadelphia Chief Executive Officer Charles Plosser believes the Fed should begin plotting its course away from accommodative fiscal policies while also unwinding a balance sheet that now stands at $2.7 trillion. The regional Fed chief also warned that the central bank risks losing credibility if it does not address the public's inflationary concerns. Plosser made those assertions while speaking at the Bank of Finland on Monday. "Given the extraordinary amount of liquidity present in the U.S. banking system, it is reasonable for the public to be concerned about the prospects for inflation down the road," Plosser said. "If the public’s expectation of inflation continues to drift upward, whether it is caused by higher commodity prices, concerns over fiscal deficits, or the Fed’s large balance sheet, we could find our credibility under pressure." His assertion comes as many economists are predicting no end to bond-buying program the Federal Reserve started last fall, given the anemic state of America's fiscal growth. To return to normal fiscal policy, Plosser recommended a combination of selling Fed assets — including mortgage-backed securities acquired in the heat of the credit crunch — and increasing the fed funds rate, which has been near zero since late 2008. Plosser suggests raising the rate by 50 basis points. "The plan would get us back to a normal operating environment in a timely manner, with the Fed’s balance sheet reduced to a size that would again allow the federal funds rate to be the primary policy instrument," he said. Plosser said now is the time to get a clear plan in place and to share it with the public. "Announcing an explicit plan in advance would also enhance the credibility of our commitment to normalization," he said.  "If, for some reason, the committee chose to deviate from the plan, it would be forced to explain its reasons to the public." Write to Kerri Panchuk.