With equity markets reacting enthusiastically to the Fed’s historic policy change announced last week, many have rushed to declare victory. Whether in asserting investor comfort with the policy regime shift or in declaring the definitive end of dependence on quantitative easing (“QE”), they believe that the markets’ short-term reaction can indeed be extrapolated into the longer-term.

Compare this with what we have been hearing from central banks. Reactions there have been quite muted. Humility may well be a factor, especially given that three prior attempts to “exit” earlier versions of QE regimes had to be abandoned. But there may well be more at play. Central bankers have good reason to be more cautious about declaring victory at this stage. And the rest of us would be well advised to ask why.

As widely reported last week, Fed policy makers decided to reduce – or “taper” – the purchases of securities. The first step, to be implemented in January, lowers the monthly market intervention from $85bn to $75bn by cutting equally both mortgage and Treasury purchases. Moreover, Ben Bernanke, outgoing Fed Chairman, signalled that – assuming there are no major economic surprises – we should expect the Fed to consistently reduce its purchases throughout 2014. So much so that, if all develops according to plan, the Fed could well terminate QE3 by the end of the coming year.