Reversed QE

 All countries have passed the era of QE, since the global economy has definitely been fully recovered from the last financial crisis that the unemployment rates in many countries have fallen to the historically lowest points. Although no central banks are expanding their QE programs, the bank rates across the world have remained low. The US President Trump has appointed the new chairman of the US Federal Reserve, the market was worried about the possible hike in the base rates. Of course, the global financial market does not like higher interest rates, as borrowing becomes more expensive; however, there is another thing that the market could hate more, which is a reversed QE.

A reversed QE is a reversed process of asset purchasing that central banks sell their holding assets which they bought via their QE programs. This will increase the supply of assets in the financial market; such massive increase of supply will add enormous downward pressure on asset prices in the financial market. How like are we going to see a reversed QE? It is possible; however, I think central banks will know the risk and it is not a big issue for them to hold so many assets, so it is more likely for central banks not starting reversed QE programs. The central banks in many countries are supposed to be independent; however, since the members of the monetary policy committees are pointed by other parties, they cannot be absolutely independent. Moreover, central banks can change their behaviors, just like governments. In the past, governments tended to balance their budgets; however, nowadays, almost all governments tend to overspend, instead of balancing their budgets, they are now trying to limit their deficits within some reasonable ranges. Central banks may learn from governments and limit their holding asset sizes within some reasonable ranges. Therefore, it is unlikely to see a worldwide reversed QE.