The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2020 Euromoney, a part of the Euromoney Institutional Investor PLC.
Capital Markets

Markets brace for the great QE unwind

Quantitative easing has been the defining monetary policy innovation of the 21st century. With global economic recovery now seemingly robust, the challenge facing policymakers is to reverse this stimulus. This is likely to be fraught with danger, particularly in Europe.

 QE_unwind-350x527

Mervyn King, the former governor of the Bank of England, once said that the central banks should aspire to dullness because, “boring is best”. When he made these remarks at the turn of the century, he could not have anticipated the way central banking would evolve. The US Federal Reserve now has a larger balance sheet than the combined market capitalization of the world’s 10 biggest companies. 

Boring is so last century.

Central banks have always been big economic actors, setting short-term interest rates and occasionally intervening to manage their currencies. But they have left the pricing of almost everything else to the invisible hand of the market. No more. Quantitative easing, a heterodox monetary policy tool pioneered by the Bank of Japan in 2001, is the new normal. Central bankers, not superstar hedgies, secretive sovereign wealth funds or pension managers, are the biggest beasts in bond markets.

Since the collapse of Lehman Brothers in 2008, central banks have bought $14.2 trillion of financial assets, mostly sovereign bonds. In 2017, $1 trillion (and counting) has been added to central bank balance sheets.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree