Bank of Japan Shocks The Markets
Good morning all and Happy Halloween which now seems to have become a much more significant event than it used to be and another excuse for proud parents to dress their kids up ridiculously and post photos on Facebook to embarrass them in the future (myself included).
The big news overnight came out of Japan as, in a surprise turn, the Bank of Japan expanded the rate of asset purchases in a move which came on the back of yet more weak inflation data. This move was largely lauded by the markets and seen as an indicator that they are doing what was necessary to avoid deflation. The sales tax which was introduced in April had a much more harmful effect than expected and it was stressed that the Bank of Japan would continue easing policy for as long as necessary.
In Europe today, it’s all about the CPI reading. This inflation data is of huge importance to the Eurozone as it is this which has been driving monetary policy for the past few years. Weaker than expected data could force Mario Draghi’s hand to impose QE but as we haven’t yet seen the result of his other policies, this would seem extremely unlikely.
In the US, all looks fine and dandy as it expanded more than expected in Q3. GDP grew at a quicker rate than any time since 2003 and as fuel prices drop and hiring picks up, this could well continue.