US Policymakers Keep Their Options Open
Yesterday, the Federal Reserve announced an “as you were” policy regarding financial stimulus and repeated that they will continue to buy $85bn worth of bonds each month until the “outlook of the labour market has improved substantially”. In the meeting, which was delayed due to the Government shutdown, it was repeated that the interest rates will remain low as long as unemployment exceeds 6.5% and the inflation outlook is no higher than 2.5%. In conclusion, not a huge amount of change and they are keeping their options open.
Yesterday saw weaker than expected German inflation data although this does not seem to have harmed the Euro which has seen a renaissance this month, even rising to 2-year highs versus the US Dollar. This trend could well continue as the ECB’s audit of 124 Eurozone institutions is encouraging lenders to repatriate overseas assets. These new stress tests begin in November and are due to end in October 2014. They are seen as a “last chance saloon” for the ECB to restore confidence in the single currency and should see European banks consolidate their balance sheets.
In New Zealand, the RBNZ left interest rates unchanged at 2.5% and indicated any movement is dependent on the strength of the housing market.
In the UK, focus was on house prices again with a Nationwide Building Society survey reporting that demand for new homes outstripped supply and prices rose by 1% month on month.