One thing has always been certain; the quantitative easing measures employed by certain central banks have always been a temporary measure that must be withdrawn at some stage. It will be for economic historians and academics to determine how effective these measures have been and what, if anything, their detrimental effect has been.
The Federal Reserve continues to pump a staggering $85 billion into asset purchase each month with the aims of minimising the longer-term cost of US borrowing, supporting homeowners by keeping mortgage costs low and injecting liquidity into the US economy in the hope that banks will lend money to businesses to drive expansion and fuel the recovery.
The minutes of the Federal Reserve’s October meeting have been released and show that the Fed intends to start the winding down of its asset purchase programme in a few months. When originally mooted, the aim was to cut back the programme this year and bring it to a halt by the end of 2014, but events changed all that. The current position is that unemployment needs to dip below the 6.5% level before the “Taper” starts to take effect, but there have been persistent rumours that the goalpost will be moved. The minutes noted that the monetary policy committee: "generally expected that the data would prove consistent with the Committee's outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months".
US stock markets have fallen back from new records as investors absorbed the new information – which does little more than restate the previous position. The Fed reiterated that interest rates are likely to remain low and may not rise when the unemployment total falls below 6.5%.