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QE's Cost: Fed Exit May Hit Economy Faster Than in Past Cycles

  • New banking regulations carry risk of unintended consequences
  • Retail-deposit grab to be `defining feature' of tightening
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Fed Decision-Day: Weighing the Impact

The Federal Reserve will have to confront the costs of its massive balance-sheet expansion when policy makers raise interest rates.

The U.S. central bank’s exit strategy from unprecedented stimulus looks set to send big ripples through the financial system once it begins. These could hit the economy faster than they did in past tightening cycles, as rate rises radiate through a banking system constrained by new regulations and flooded with cash created by the Fed’s bond-buying program.