Wall Street Journal (05/21/14) Michael Derby

Two U.S. Federal Reserve officials have made the case that novel tools could be employed to push short-term interest rates higher, but they say that the tools’ use does not necessarily mean that there will be a permanent policymaking overhaul. New York Federal Reserve Bank chief William Dudley and San Francisco Federal Reserve Bank chief John Williams said the new tools could include reverse repos and interest paid on excess reserves, which could lift short-term interest rates from near zero.

The discussions have not outlined a specific time table for the rate increases, though Dudley cautioned the first rate increase is likely still well into the future and it is unclear when it will occur. Williams said he thinks it will likely come some time in the second half of 2015. Both have said that these alternative exit strategies do not mean the Fed will retire its benchmark interest rate, but that the Fed may use a combination of tools when it starts raising rates and use other tools later.