Setting a target for the size of the Federal Reserve's balance sheet, as in a QE regime, could thus have the perverse effect of forcing the Fed to tighten the terms and availability of its lending at times when market conditions were worsening, and vice versa. The lack of a simple summary measure or policy target poses an important communications challenge.
Lorenzo Bini Smaghi: The financial crisis and global imbalances – two sides of the same coin Speech by Mr Lorenzo Bini Smaghi, Member of the Executive Board of the European Central Bank, at the Asia Europe Economic Forum conference “The Global Financial Crisis: Policy choices in Asia and Europe”, Beijing, 9 December 2008.