WASHINGTON — With the economy showing signs of recovery, Federal Reserve Board Chairman Ben Bernanke gave more clues Wednesday to how the central bank will return to normal and made clear that financial institutions are central to his plans.
One of the biggest challenges facing the Fed is figuring out how to grapple with the trillions in cash it has dumped into financial markets since 2007 to fight the financial crisis. If the Fed is to avoid inflation, it must find a way to sop up that cash. Given how much is out there, Bernanke said, the central bank's traditional tool — raising the federal funds rate — may not be enough.
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