Besides being a problem in its own right, this would also imply that the (standard) models central banks use for forecasting may become inaccurate and provide poor guidance for policy decisions. Our research also shows that there is a concrete risk of an outright de-anchoring of inflation expectations (Cecchetti et al., 2015).
Indeed, in the recent months, turbulence in the global financial markets seems to have somewhat been moderated. This possibly reflects the fact that much of future risk of the Fed tapering has been priced in during the second half of 2013 outflow episodes. 12. This is, however, not to say that short-term volatilities are no longer with us.