The Exit Strategy Of Fed Quantitative Easing Monetary Policy And Its Effect

With the improvement of U.S. economic data, on October 29, 2014, the Fed Chairman Yellen announced to conclude its asset purchase program in the federal reserve’s policy-setting meeting.The exit signs that the quantitative easing has been out of the first step, the next step will be raising interest rates and sell the asset of the fed’s account. How to exit quantitative easing monetary policy, how to return the fed’s monetary polic to normalcy is still uncertain. At the same time the exiting of America quantitative easing will deeply affect the Chinese economy. At the same time the exiting of America quantitative easing will deeply affect the Chinese economy. So agains the exiting of qtuantitative easing monetary policy and its economic impact, it is necessary to conduct a comprehensive and in-depth research. By studying the condition of the fed’s balance sheet, the characteristics and implementation of QE to exit the tool conditions, analysis of the federal reserve’s exit strategy, and predict the impact of QE exit on China’s economy, has important theoretical and realistic significance.The uncertainty and complexity of quantitative easing exiting is mainly on the choice of exit timing, because raising interest rates and selling assets held by the federal reserve will have a significant impact on the real economy and financial market. According to the Fed and the international monetary fund economic forecasting data, we use appropriate data into the 1999’s Taylor rule equation.we can predict the time of the fed to raise interest rates. The federal reserve will begin to raise interest rates for the first time in 2015, raising interest rates time not earlier than September. The rate increase will be 25 basis points on the current baise range of 0-0.25%. At the end of 2015 the federal funds rate level will be in 0.5 to 0.75%. Forecast in 2016 the federal reserve will be five interest rate hikes, 25 basis points each time.At the end of 2016, the federal funds rate level is 1.75-2.0%. According to the financial market leverage, fixed income securities scale held by the Fed, the real estate market situation, we can predict the time of the fed to sell national debt and mortgage-backed securities. Before the sale, the fed must use liquidity, such as the repurchase agreement and the deposit recycling tools to supervise and control the excess liquidity, by taking the excess reserves of depository institutions translate into term deposits at the federal reserve.With the speeding up of Chinese interest rate system reform and exchange rate system reform, the openness of the domestic capital market is gradually increasing, the domestic financial market will face more and more impact from the international market. China should pay close attention to the fed’s monetary policy changes, respond as early as possible, and avoid the adverse effects of QE’s exit to our country’s economy development and the shock to our financial system.This article is divided into five chapters. The first chapter mainly introduces the basic theory of the quantitative easing monetary policy and the implementation process, and the change of the fed’s balance sheet. The second Chapter analyzes the background to end the quantitative easing policy and the Fed’s policy framework. The third chapter is the core of this article, analyzes the complexity of the QE exit timing, puts forward the quantitative easing exit strategies and the exit’s tool selection, and predict the timing of the federal reserve and the balance sheet shrinkage conditions. The fourth chapter mainly analyzes the impact of QE exit to global economy and China’s economy.The fifth chapter is the conclusion and policy recommendations.