No-Exit Strategy May Be Fed Burden in Unwinding Stimulus

The Federal Reserve is trying to change as little as possible as it crafts its strategy to exit from record stimulus. The trouble is financial markets have changed so much that the still-developing plan may prove costly and ultimately unworkable.

The approach, sketched out in the minutes of the Fed’s June 17-18 meeting and in officials’ comments since then, retains a focus on the federal funds rate as the central bank’s target. Policy would continue to be conducted mainly through banks rather than via dealings with money-market funds.