Central Banks Need to End QE for the Sake of Markets

The annual Jackson Hole symposium on monetary policy starts this week. It will be about “Fostering a Dynamic Global Economy”: In other words, central bankers will sit down to discuss long-term goals and avoid publicly communicating policy decisions, if recent news reports about the Federal Reserve and the European Central Bank prove accurate.

But make no mistake, this year’s meeting is critically important. Two topics should dominate the conversation. The first is why despite falling unemployment, inflation remains elusive. The second is how to coordinate an exit from quantitative easing measures. Those two topics are not at odds. There are good reasons why central bankers should want to exit QE even though inflation remains far below their targets.