This can also influence the prices of collateral, but the role of selecting which assets to buy or sell is essentially “outsourced” to the banking system, that is, to many private agents. Hence, collateralised lending leaves the price discovery process and the allocation of savings to market mechanisms.
Its promise not to follow that usual pattern of reaction will be painful to fulfil, when that time comes, because the central bank will have to watch inflation rising while remaining atypically passive.