Fed gets ready to end QE, BoE split on rate hike, ECB considers additional actions

Source: Dukascopy Bank SA
Despite the recent  volatility in financial markets the Fed is expected to end its bond-buying programme as planned at the end of the current month despite the recent market volatility. The Fed is set to wind down its bond-buying stimulus at its meeting next week, but also said it will keep interest rates near zero for a "considerable time" after the end of bond-buying. The Fed is still likely to start raising interest rates in mid-2015, although it now seems a little less likely that the central bank would act sooner, and there are more chances it would wait longer amid concerns about persistently low inflation. Fed officials meet on 28-29 October to decide whether to withdraw its bond-buying programme as planned, and what language to use to communicate when they will raise borrowing costs.
Meanwhile, the world's second-biggest economy China, posted the slowest economic growth since the global financial crisis in the third quarter and risks missing the official goal for the first time in 15 years, reinforcing the view the world's number two economy is becoming a drag on global economy. China's GDP rose 7.3% in the July-September quarter from the previous year. Nevertheless, China's government said previously it would tolerate economic growth slightly below the official target this year by refraining from broad stimulus.
In the UK, a major positive spotlight in the global economy, officials remained split on hiking interest rates, with the majority of policy makers voted against immediate rate lift, while two officials were in favour for the third consecutive month. However, all MPC members were unanimous on maintaining the asset purchase facility unchanged. Thus, the MPC agreed in October to leave the BoE's benchmark interest rate at all-time low of 0.5% and the total size of its bond-buying stimulus programme unchanged at 375 billion pounds.
In the previous week, the ECB bought Spanish, French and German covered bonds with maturities from one to six years. The central bank will publish the exact amounts purchased every Monday. The other part of its asset-buying programme, the ABS purchases, will begin in the fourth quarter and will be accompanied by another tool, a second round of TLTROs, or four-year loans at ultra-cheap rates offered to the region's banking sector.  On top of that, the central bank is pondering to purchase corporate bonds on the secondary market and may make the corresponding decision as soon as December, several people familiar with a matter said. The central bank may begin buying bonds already in the beginning of next year. This would expand the recently launched private-sector asset-buying scheme, part of a private-sector asset-purchase programme that will also see it buy asset-backed securities later this year. It is estimated that the central bank could inject one trillion euros into the Euro zone's financial system. These measures are aimed at increasing lending to businesses and thereby support the Euro zone economy. However, there is concern at the ECB that these measures may have an insufficient effect to help support the economy.

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