Is this the beginning of the end of the beginning?
The European Central Bank (ECB) is gently creeping up on the idea of starting to turn off the monetary taps.
When the US Federal Reserve tried to do the same back in 2013, it resulted in the "taper tantrum", whereby markets sprang a hissy fit and bond yields spiked.
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Will we see a repeat in Europe? And will the consequences be more meaningful this time around?
A brief history of QE in the eurozone
The ECB next meets in Riga on 14 June (next Thursday). And all eyes are on the central bank to see if it will start to lay out its plans for withdrawing quantitative easing (QE).
The ECB's chief economist, Peter Praet, and Jens Weidmann the head of Germany's central bank, the Bundesbank both spoke this week about the idea of discussing the end of QE. As Praet put it: "The governing council will have to assess whether progress so far has been sufficient to warrant a gradual unwinding of our net purchases."
Now, just to be clear here, we are not talking about actually ending QE, we are merely talking about the ECB having a discussion about when and how it should end QE.
It shows you something about how dependent on central banks markets have become, that even talking about gentle shifts in policy has become so fraught with meaning and potential for sell-offs.
Then again, you can see why markets might be a little jittery. After all, the ECB is running well behind most of the rest of the world's central banks on this front. And it also has a tougher job.
The ECB began its own QE in March 2015. By that point, ECB boss Mario Draghi had managed to convince markets that he really would do "whatever it takes" to save the euro. It took him a while after that to twist the Germans' arms on actual money printing, but he got there in the end.
The ECB started off by buying €60bn of eurozone sovereign bonds every month, raised that to €80bn, then cut it to €30bn. It is scheduled to end in September, although the pacing of that is up for grabs.
It's no surprise that the bank is now thinking about how to bring QE to an end. Consumer price inflation came in at 1.9% in March which is bang on the ECB's target of below, but close to, 2% inflation a year, over the medium term.
The influence of Germany in particular means that the ECB is very sensitive to inflation. Other central banks might be inclined to go easy on it, but not the eurozone's.
As a result of Praet and Weidmann's gentle suggestions, markets pushed the euro higher (QE weakens the currency) and also drove up bond yields (if the ECB isn't buying this stuff, the question is who will?).
Watch for signs of the hawks taking over from Draghi
Of course, the tricky question here is: is the eurozone ready for this?
It's worth remembering why this whole scheme of money printing came about in the first place. The eurozone crisis blew up when investors suddenly realised that Greek government debt really wasn't financially underwritten by Germany.
The ECB had to step in with much internal resistance to effectively promise to be the lender of last resort. This drove sovereign debt yields lower, and stopped the eurozone from breaking up.
As Marcus Ashworth puts it on Bloomberg, the ECB's presence in the bond markets of "troubled countries" the likes of Italy, for example "has given them political breathing space by keeping yields low. It's tough to see how the bank can suddenly withdraw without serious consequences."
So here's what Draghi now has to cross his fingers and hope for: one, that investors now believe that countries are largely healed economically, and thus able to stand on their own two feet; or, two, that if they're not, the ECB will definitely step in to save the eurozone once again in the future.
For now, that might not seem like a big issue. Italy is for this week at least now back on the "slow-burning" hob on the eurozone stove, rather than the "fetch the fire extinguisher" front burner. That gives the ECB its opportunity to be a bit hawkish in its speech.
Yet, it's hard to imagine Draghi giving up the opportunity to reactivate or spread out the end of QE if necessary. After all, the market might trust him to always do what it takes but will they trust his successor?
As Ashworth points out, "What's up for grabs is the timing and amount of the tapering". On that point of view, you have to expect Draghi to be very careful about allowing the ECB to over-commit. He might talk a good game at the next meeting, but then leave the details quite vague; or spread the taper out for longer than anyone expects just in case.
What's the upshot? We might see a stronger euro (and thus a weaker dollar, which global markets will like). But keep an eye on the smoke signals from the ECB with Draghi set to step down next year, any sign that the hawks are starting to take over could well be met with panic from the markets.
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