The US Federal Reserve may soon have a new chairman – and what a time to take over. Assuming Ben Bernanke leaves his post this year, his successor will inherit a serious policy challenge: disengaging from quantitative easing.
Returning to more traditional monetary policy will be tricky. First, there is no precedent in the Fed’s 100-year history. Has there ever been a period in which the US central bank and its leading counterparts worldwide have simultaneously pursued QE against a backdrop of economic faltering and uncoordinated fiscal policies?
Second, a prerequisite for ending QE is considerable evidence of a return to normalcy in economic and financial growth. Despite the good news suggested by last week’s jobs data, right now that is not yet fully visible, either in the US or abroad.