Nomura chief economist Richard Koo, warns that the Fed is now facing the true cost of QE as rates are rising too fast to support a sustainable economic...

Joanne Ma
Joanne Ma Livewire Markets

Nomura chief economist Richard Koo, warns that the Fed is now facing the true cost of QE as rates are rising too fast to support a sustainable economic recovery. He writes, Had the Fed not implemented QE, long-term rates would not have risen so early in the rebound, and the economic recovery would have proceeded smoothly. Now, any talk of ending QE pushes long-term rates higher and throws cold water on the economy, making it more difficult to discontinue the policy. According to Koo, the Fed has placed itself in a QE trap of its own making and will be unable to escape for years to come. I have previously described QE as a policy that is easy to begin and hard - even scary - to end. The recent drama over tapering signals the start of the less-pleasant second part, says Koo. (VIEW LINK)

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