With the Fed and ECB unwinding QE, what happens when we come off the meds? There are signs that the patient (the economy) has healed, suggesting limited withdrawal effects. While addiction and placebo effects could still increase risk premia, low inflation reduces the risk of going ‘cold turkey’.
Monetary policymakers are often described as heading into “uncharted territory”. The latest example is the Bank of Japan’s decision to introduce a target for ten-year yields. You won’t find a precedent of this policy in recent history. But the territory is not totally uncharted: we saw something very similar in the USA roughly seventy years ago.