(Bloomberg) -- Veteran Federal Reserve watcher Mickey Levy says investor worry over the central bank’s eventual pullback from its monthly bond purchases is overdone.

“Think about the following: You have an $8.5 trillion portfolio at the Fed, it’s buying at $120 billion extra a month and it’s reinvesting all of the maturing assets,” Levy, chief economist for the U.S. and Asia at Berenberg Capital Markets, said in an interview on Bloomberg TV’s Surveillance on Tuesday. “What’s the difference to the economy or financial markets if it slows down and buys $105 billion new a month?” 

He added, “It has no impact on the economy.” 

Levy pointed out that Fed Chairman Jerome Powell has said that tapering won’t affect when the central bank would consider raising interest rates. 

“You could have an announcement” of Fed tapering, “and bond yields will go up a little bit,” Levy noted. “But they are already ridiculously low, so it really shouldn’t have much of an impact at all.” 

However, there will be a reckoning for the market regarding Fed policy and rising inflation.

“As the Fed tapers, and then eventually as it normalizes interest rates, how will bond markets and the stock market respond?,” Levy said. “It is going to have to raise bond yields, normalize them to that rate -- which is consistent with its long-range objectives, that is, stable low inflation and sustained economic growth. That’s the real dilemma the Fed faces.”

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