Thursday, 4 November 2010

Fed launches QE2 as recovery shows strength

The Federal Reserve launched QE2 on Wednesday. Bloomberg reports:

The Federal Reserve will buy an additional $600 billion of Treasuries through June, expanding record stimulus and risking its credibility in a bid to reduce unemployment and avert deflation.

Policy makers, who said new purchases will be about $75 billion a month, “will adjust the program as needed to best foster maximum employment and price stability,” the Fed’s Open Market Committee said in a statement in Washington. The central bank retained its pledge to keep interest rates low for an “extended period.”

This comes as the US economy shows signs of renewed strength. Again from Bloomberg:

Services in the U.S. expanded in October at the fastest pace in three months, indicating the recovery is gaining strength even as central bankers loosen monetary policy.

The Institute for Supply Management’s index of non- manufacturing businesses, which covers about 90 percent of the economy, rose to 54.3 from 53.2 in September. Readings greater than 50 signal growth...

Another report today showed U.S. companies added more jobs than forecast in October. ADP Employer Services said employment rose by 43,000 last month. The median projection in a Bloomberg survey called for a gain of 20,000. September was revised to a 2,000 decrease from a previously reported 39,000 decline...

The Commerce Department said factory orders in September rose 2.1 percent. The figures also signaled spending on equipment and software, which helped the U.S. rebound from recession, may cool less than previously estimated.

Growth in the UK services sector also accelerated in October. Bloomberg reports:

A U.K. index of growth in services businesses from banks to airlines unexpectedly rose in October to the highest level in four months.

The gauge rose to 53.2 from 52.8 in September, Markit Economics and the Chartered Institute of Purchasing and Supply said in an e-mailed statement today in London. Economists forecast a decline to 52.6, according to the median of 25 estimates in a Bloomberg News survey. A reading above 50 indicates growth.

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