Conversely, Argentina was seriously debating giving up its currency board arrangement and adopting the US dollar. And of course this past January, Ecuador embarked on the road to “dollarization” in an effort to restore political and economic stability there.
So, the anchoring of rate expectations is reinforced by asset purchases. And, conversely, the net stimulus provided by asset purchases through compression of the term premia depends, in part, on expectations of how policymakers will adjust short-term interest rates in the future in response to the stronger real activity and inflation sparked by lower term premia.