Full-fat monetary policy

COMMENT

It seems very likely that when, in a year's time, I am writing about economic prospects, one of the subjects moving into focus will be the timing of an increase in interest rates.

That is not to say the future of monetary policy is not being debated now. But the intention of guidance from central banks is to reassure markets that policy will not be tightened any time soon. To be sure, the Fed has begun tapering its quantitative easing (QE) – but this is not tightening; it is simply and very gradually reducing the rate at which liquidity is being pushed into the financial system. QE is nothing short of the biggest policy experiment we have seen in our lifetimes. To date, its most obvious impact has been on asset prices, particularly those of government bonds, bu...