As it reflects better economic prospects, unwinding is a welcome development. But central banks are nonetheless sailing in uncharted waters. Unconventional monetary policies, including asset purchases and forward guidance, are unprecedented; changes in the use of these instruments compound uncertainty related to the eventual decision to raise policy interest rates. Authorities will no doubt withdraw monetary expansion in the most cautious way possible.
However, dissonance between their communication and public perceptions of future actions may give rise to sharp market fluctuations, as occurred in 2013. In any case, even without future turbulence, financing for emerging economies will likely become tighter, chilling enthusiasm somewhat from portfolio investors for their assets.