Taper talk a prelude to bigger policy debate

Talk of tapering in recent weeks has been premature and we suspect that most major central banks will keep up asset purchases at their current pace for the rest of the year. Assuming that tapering starts once recoveries are well underway, and that the process is well communicated, we do not foresee a repeat of the “taper tantrum” of 2013. With that being said, the sheer scale of the expansion in central banks’ balance sheets over the past year will have major implications of the conduct of monetary policy in the post-pandemic era – and is likely to require further unconventional thinking by policymakers.