In part 2 of this series, Frances challenges a wide range of myths surrounding QE and inflation, exchange rates and liquidity. Overall, QE doesn’t significantly raise inflation, as shown in the Eurozone case, QE has little effect on the exchange rate, unless investors are being irrational about inflation, and QE does have the effect of providing liquidity to the market.
Key learning objectives:
What was the myth surrounding QE and inflation?
What is the myth regarding exchange rates?
What is the effect of QE on liquidity in the repo market?