Normalising abnormal policies is proving to be difficult.

"Prices in the US are rising at their fastest rate in almost 40 years, with inflation up 7% year-on-year in December," BBC. "Strong demand and scarce supply for key items such as cars are driving the increases, which are putting pressure on policymakers to act." In the UK, figures published last month showed that "the cost of living rose by 5.1% in the 12 months to November, its highest rate in 10 years", BBC. The Bank of England was quick to respond by raising "interest rates for the first time since the onset of the pandemic, increasing its interest rate to 0.25% from its historic low of 0.1% as inflation pressures mount," CNBC. In the US, "The pressures pushing prices to multi-decade highs are likely to last till the middle of the year, and the US central bank is ready to respond to this risk, but policymakers are committed to extending the economic expansion to promote employment, Federal Reserve Chief told" the Congress, TOI. "We're going to end our asset purchases in March, meaning we'll be raising rates over the course of the year," Powell said....at his confirmation hearing before the Senate Banking Committee. "At some point, perhaps later this year, we will start to allow the balance sheet to run off, and that's just the road to normalising," BS. The process of normalising is to happen in three steps. The Fed has already started reducing its bond buying program. "The Fed will be buying $60 billion of bonds each month starting in January, half the level prior to the November taper and $30 billion less than it had been buying in December. The Fed was tapering by $15 billion a month in November, doubled that in December, then will accelerate the reduction further come 2022," CNBC. The second step will be to increase rates from near zero percent. Earlier the Fed predicted three rate rises this year, CBS, but Goldman Sachs recently predicted that the Fed will be forced to raise interest rate at least four times, by a quarter percent each time, which means a full 1% rise this year, CNBC, Mohamed A El-Erian is not impressed. "The US Fed is already seriously lagging developments on the ground and associated policy imperatives. It should have, as I have argued for months now, moved much earlier to ease its foot off the 'pedal-to-the-metal' accelerator," Mint. "Introduced as an emergency response for a severe fall in aggregated demand at the end of 2008 and the beginning of 2009, quantitative easing (QE) has since become the main policy tool of of advanced economy central banks," wrote former Bank of England Mervyn King. "Central banks have seemed to assume that any adverse shock justifies another round of bond buying." "Today, policymakers are struggling to explain how or even whether QE will be unwound." However, in the slowdown in economic activity due to the virus, "a lot of money has found its way into stocks and real estate, leading to a rapid increase in their prices -- or asset price inflation," wrote Vivek Kaul. Abnormal conditions required abnormal policies. Normalising will not be easy.