| Seece said: So you've said in the past that BOJ's easing will come back to bite them in the ass, how bad will it be? |
If you can't cut interst rates (i.e. interest rates are already at zero) to stimulate economic activity and increase inflation, then you have to pump more money into the economy. The trick to loosening up the purse strings is timing the tightening back up again. Tighten too early and the economy and inflation fall back. Tighten too late and inflation increases too much, which then means a faster and higher increase in interest rates to try to cool things off, which can then lead to the economy stalling because of high inflation and high interest rates.
Arse biting (aren't you a Brit? Why are you spelling arse wrong?) is not guaranteed, but it is a significant risk. It'll be interesting to see of the US Fed gets the timing right.
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