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The Federal Reserve’s Exit Strategy and the Threat of Inflation

In: The Financial Crisis and Federal Reserve Policy

Author

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  • Lloyd B. Thomas

Abstract

The National Bureau of Economic Research ultimately determined that the Great Recession ended in June 2009. Owing to the anemic nature of the ensuing recovery, the nation’s unemployment rate stubbornly remained near 7.5 percent in June 2013, when 3 million fewer Americans held jobs than in December 2007. Despite considerable apparent slack in the U.S. economy, economists debated whether the Federal Reserve was overdue in unwinding its policy of extraordinary stimulus (quantitative easing). Some feared the stage was set for an era of high inflation. The unprecedented expansion of the Fed balance sheet during 2008–2013 had more than tripled the monetary base and multiplied bank reserves by a factor of 20. Excess reserves in the banking system increased from less than $2 billion at the beginning of 2008 to more than $1,800 billion in June 2013.

Suggested Citation

  • Lloyd B. Thomas, 2013. "The Federal Reserve’s Exit Strategy and the Threat of Inflation," Palgrave Macmillan Books, in: The Financial Crisis and Federal Reserve Policy, edition 0, chapter 0, pages 207-221, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-40122-9_13
    DOI: 10.1057/9781137401229_13
    as

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