One possible approach was to start by reducing the Federal Reserve’s securities holdings while short-term interest rates remained at the lower bound.
We could allow securities to roll off the Federal Reserve’s balance sheet and even sell securities, thereby putting upward pressure on long-term rates while calibrating the pace and configuration of the reduction in our holdings as warranted by our maximum employment and price stability objectives. Eventually, once our securities holdings had shrunk sufficiently, the FOMC could start nudging up its short-term interest rate target.