Finally, the Fed is being challenged on the risks in the process of unwinding QE, in particular of how this could be managed consistent with price stability and financial stability. Chairman Bernanke has responded to the above criticism on several occasions from various platforms. He has also found an innovative answer for each new problem thrown at him so far.
This is all the more remarkable given that there is no recent real life experience to draw from. Central banks and the new trilemma As a central bank, we empathize with the Fed’s concerns. The crisis has pushed central bank policy making into uncharted territory.