The Fed's Exit Strategy: A Delicate Balancing Act

The 2008 financial crisis and the ensuing Great Recession led to extraordinary monetary policies in which the U.S. Federal Reserve Bank lowered its target fed funds rate to near zero, engaged in massive quantitative easing (QE) and created special vehicles to bail out nonbank financial institutions. It is now more than five years since the crisis ended, but short-run interest rates remain near zero and the Fed's balance sheet continues to expand, although at a slower rate since tapering began earlier this year.