Joanne Ma

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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