In the next two months, it is going to be two years since Federal Reserve Bank started the first round of stimulus that was the QE 4 officially. This had next to zero interest rates, the massive amount of bond-buying every week, and the total dovish view on the period of it. But as the inflation spike appeared it acted like a bond villain pushing Jerome Bond in full stealth mode from November 2021.
If you would look at his recent policy speech it was nothing short of a challenge to Inflation on a full offence. So what are his weapons of choice? First, is quickly winding up the asset purchase program by March-early meaning no liquidity support for many bondholders that will run towards the exit. Second, the toughest one as the reversal of any shots fired from this has immense damage and weapon is called Interest Rate Hike. The last one is the most deadly in terms of damage, that is balance sheet reduction aka Quantitative Tightening.
This plot and all the action are being scripted and filmed all over the world that would make sure the reversal of the money that has enjoyed massive return in last two years comes back home.
Though the script and actors are sure of victory there is a strong villain that might just result in the twist to the plot and a whole different ending to this part of the script.
If previous instances are followed then the damage will be on both sides and might result in a crisis during the summer of 2022 and we might have QE 5 release by Fall of 2023.