Troy's Lyon: Fed may not be able to stop deflationary shock

The latest round of QE from the US Federal Reserve may not be enough to prevent the global economy from experiencing a deflationary episode, according to Sebastian Lyon, manager of the £2.2bn Troy Trojan fund.

Lyon (pictured) said the fresh instalment of asset purchases, announced by the Fed last month, does not constitute the much-debated monetary policy "bazooka" - despite Fed chair Ben Bernanke committing to "open-ended" easing. With markets displaying little reaction, in contrast to the response to earlier rounds of QE, Lyon suggested central bankers' ability to stave off more serious short-term issues is waning. "Central banks are falling victim to the law of diminishing returns. Optimism has been replaced with cynicism as newly printed money has largely failed to make it into the wide...