Diminishing marginal efficiency of monetary policy

Monetary policy is not different than any other good or service. There is a law of diminishing marginal utility or efficiency. As more money through reserves is pushed into the economy, the marginal impact of that dollar declines.

The first QE period had a significant economic effect because a lot of liquidity was needed immediately. Each subsequent QE has had less impact on markets, albeit the equity markets do not seem to follow this rule. Excess reserves have increased because the amount of lending relative to total reserves is less. Banks do not know what to do with the excess relative to the amount of effective loan projects available. The money multiplier has remained low.  This has led to a lower chance of inflation. There is still a zero bound problem, but there is also a simpler problem that extra money is not needed to increase aggregate demand Put differently in simple microeconomic terms, any marginal increase in money will have limited impact. 

This is a good reason for halting QE in the US; however, it also means that other policy initiatives will have to be employed if monetary policy is to be effective. This is one of the reason for the emphasis on forward guidance and the desire by the Fed to control expectations. Pushing more supply may not be effective.