I believe that the exit strategy principles laid out by the FOMC in June 2011 still apply. More specifically, we need to return to an operating framework in which a market interest rate is our policy instrument.
We also should shrink the size of our balance sheet, which is now about $ trillion, and return to an all-Treasuries portfolio as part of the normalization process. This sounds easy in principle, but I believe the size and composition of our balance sheet will make it challenging to execute smoothly.