deleveraging that is hopefully winding down. if the purported benefits are small, what are the possible costs? first, without clear terms and goals, quantitative easing becomes an open - ended commitment that leads to maintaining the funds rate too low and the federal reserve ’ s balance sheet too large. the result is a further misallocation of resources, more imbalances and more volatility. there is no working framework that defines how a quantitative easing program would be managed. how long would the program continue, and what would be the ultimate size? would purchases of long - term assets continue until the unemployment rate is 9 percent or 8 percent or even less? would purchases continue until inflation rises to 2 percent or 3 percent or more? would the program aim to reduce the 10 - year treasury rate to 2¼ percent or 2 percent or even less? without answers to these and other questions, qe2 becomes an open - ended policy that introduces additional uncertainty into markets with few offsetting benefits. as central bank assets expand under quantitative easing, what will be the exit strategy? in the midst of a financial crisis, we may not have the luxury of thinking about the exit strategy. in current circumstances, however, we must define an exit strategy if the objective is to raise inflation but contain interest rate expectations. if history is any indication, without an exit strategy the natural tendency will be to maintain an accommodative policy for too long. while i agree that the tools are available to reduce excess reserves when that becomes appropriate, i do not believe that the federal reserve, or anyone else, has the foresight to do it at the right time or right speed. it may work in theory. in practice, however, the federal reserve doesn ’ t have a good track record of withdrawing policy accommodation in a timely manner. second, we risk undermining federal reserve independence. qe2 actions approach fiscal policy actions. purchasing private assets or long - term treasury securities shifts risk from investors to the federal reserve and, ultimately, to u. s. taxpayers. it also encourages greater attempts to influence what assets the federal reserve purchases. when the federal reserve buys long - term securities – such as the $ 1. 2 trillion in mortgage backed securities it purchased during the financial crisis – it favors some segments of the market over others. and when the federal reserve is a ready buyer of government debt, it becomes a convenient source of cash for fiscal programs. during a crisis this may be justified, but as

these remarks were prepared based on data available as of september 5, 2024. 2 john c. williams, a bedrock commitment to price stability, remarks at the 2022 u. s. hispanic chamber of commerce national conference, phoenix, arizona, october 3, 2022 ; john c. williams, peeling the inflation onion, remarks at the economic club of new york ( delivered via videoconference ), november 28, 2022 ; john c. williams, " peeling the inflation onion, revisited, " federal reserve bank of new york, the teller window, september 29, 2023. 3 federal reserve bank of new york, multivariate core trend inflation. 4 federal reserve bank of new york, survey of consumer expectations ( july 2024 survey ). 5 federal reserve bank of atlanta, business inflation expectations, august 2024. 6 board of governors of the federal reserve system, federal reserve issues fomc statement, july 31, 2024. 4 / 4 bis - central bankers'speeches