This essentially involves a rapidly expanding economy that requires reversing QE in order to slow it down. To do this, central banks can take their time unwinding QE, and use interest rates to tighten policy where necessary. However, associated with this are a wide array of concerns; for example, huge central bank losses.
Key learning objectives:
Identify the 4 stages of QE
Discuss the biggest concerns of the unwind
When is the best time for banks to reduce their balance sheets?