Exit Strategy

Central banks have broken new ground in the aftermath of the Great Financial Crisis. They have brought interest rates down very close to the zero lower bound and have committed to keeping them there for an extended period of time. They have multiplied the sizes of their balance sheets several times over. Hopefully, the exceptional circumstances that led to these extraordinary measures will dissipate. Undoing extraordinary actions is bound to be out of the ordinary, and therefore fraught with difficulties, if not dangers. The exit strategy, as the pending operation is called, needs to be thought through with great care.