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Bye to QE—for now?

First published:, 17/10/2016

More activist fiscal policy is on the way

It began as a response to the sclerosis that shut down the credit arteries of our economies in the wake of the great financial crisis. Quantitative easing (QE), under which central banks bought government and private-sector assets, was deployed to stabilise the financial system. It remained in place later as the principal policy tool to stimulate growth and inflation while many governments presided over restrictive fiscal policies (aka austerity) in order to lower budget deficits. The balance sheets of major Western central banks rose from less than $4 trillion in 2008 to the current level of about $14 trillion. But now, in a turbulent and often shocking year, it looks like regime change is upon us. QE seems gradually to be handing over the baton to fiscal activism. Should we bury or praise QE?

The US Federal Reserve stopped buying assets two years ago, and as is well known,…Read more: