2  BIS central bankers’ speeches  Any exit plan that is to lead us to a corridor-like operating system has to describe how the fed funds rate or interest rate on reserves will be increased and how the balance sheet will be reduced.
Regarding deflation, the following four comments are in order. First, some deflation can theoretically be justified in terms of economic welfare. Friedman advanced the argument that one way the economy can achieve the long-run optimum quantity of money is with a rate of deflation that makes the nominal rate of interest equal to zero. Another way would be to pay interest on money balances.