Much of the most vocal and opinionated analysis of the impacts of central bank asset purchases – quantitative easing – strikes me as somewhat contradictory. But it is also important and may explain the recent reaction, quite probably an overreaction, to limited news from the Federal Reserve on asset purchases.

Some people seem to believe that large-scale asset purchases by central banks have created bubbles in many markets and that stopping such purchases (let alone reversing them) must cause big falls in prices. Others take the view that these central bank purchases are ineffective in stimulating demand in the wider economy. I think the evidence for either of these positions is weak. But some people believe both things – a position that I think is also contradictory as well as being profoundly pessimistic.

The first claim – that QE has artificially boosted prices to bubble levels – does not stand up. It is certainly true that in purchasing financial assets, central banks – certainly the Bank of England’s Monetary Policy Committee – has deliberately and consciously raised the demand for these assets and that will have supported their price.