Can quantitative easing be unwound safely?

16/02/2018

David Lloyd discusses the challenges and risks facing central banks as they begin to reverse a decade of ultra-loose monetary policy.

Central banks face a huge challenge in successfully weaning the world off ultra-accommodative monetary policy and reducing the sizes of their balance sheets by gradually selling down their huge stockpiles of bonds.

While their actions helped calm the waters during the storm of the global financial crisis, there is no successful precedent for the delicate task they now face. If it goes wrong, central banks run the risk of undoing much of the good QE has achieved.

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The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested.