Under the old plan from 2011, the Fed expected to take a number of steps to remove the trillions it pumped into the financial system. A new plan being considered would instead leave that money in, perhaps permanently, instead paying interest on excess reserves and anchoring rates using reverse repos.
The upshot: The Fed would set interest rates by managing the cost rather than the supply of money.
This jibes with previous Fed comments that the central may not have to actively sell MBS on its balance sheets, and just last week FRBNY President Bill Dudley said the Fed wouldn't have to allow paper to mature and run off its balance sheet months ahead of rate hikes.
The new plan is just a trial balloon, reminds Hilsenrath, noting some at the Fed would prefer a return to the old days of scarce reserves and setting rates by managing those levels.