The realisation that the Fed is likely to go on buying assets at its current pace for longer than previously anticipated has once again focused attention on the costs of QE. The more apocalyptic warnings of hyperinflation, or the re-emergence of massive asset price bubbles, appear to be over-stated. Nonetheless, unwinding QE on this scale will be uncharted territory for central bankers. If nothing else, there will be persistent worries that bond markets will over-react to any tapering hints or that some financial institutions will suffer significant losses once asset purchases cease.
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