The Bank of England on What Happens When QE Ends

From MoneyBeat:

What happens after central banks stop their asset purchase programs?
Now that markets are pulling forward expectations of interest rate rises in both the U.K. and the U.S., it’s worth looking back at a stylized chart a group of Bank of England economists produced for a paper published in Q3 of the bank’s 2011 Quarterly Bulletin.

The Bank of England’s QE Playbook. According to this chart, QE ends at the dotted line.

Bank of England

The chart makes an interesting assumption: that the broad money supply pushed up by QE will stay fixed and that the consumer price level will rise to meet that broad money level through rising inflation. In fact it seems to imply an inflationary overshoot, following a jump in real economic growth, before the system returns to equilibrium....MORE