These tendencies really do pose an economic risk – and yes, ultimately also a risk to growth and welfare. It is therefore all the more important that the current trade dispute does not escalate into a full-blown trade war. Forward guidance is also proving useful with respect to communicating the approaching end of the asset purchases.
Very helpful in this context are the Fed’s experiences with the process of normalisation. The comparatively vague announcement of a potential step-down of its asset purchases in May 2015 caused strong reactions in the financial markets, in the context of which the term “taper tantrum” was coined.