Thursday, 31 October 2013

Fed maintains stimulus, stocks fall

There was no change to the Federal Reserve's monetary policy after its meeting on Wednesday. Bloomberg reports:

The Federal Reserve decided to press on with $85 billion in monthly bond purchases, saying it needs to see more evidence that the economy will continue to improve.

“The recovery in the housing sector slowed somewhat in recent months,” the Federal Open Market Committee (FDTR) said today at the end of a two-day meeting in Washington. “Fiscal policy is restraining economic growth.”

US stocks fell anyway, the S&P 500 declining 0.5 percent to end its four-day winning streak.

The Fed's hesitance in removing monetary stimulus appears consistent with US economic data on Wednesday. A report from ADP showed that private sector employers added 130,000 jobs in October, the fewest since April. A report from the Labor Department showed that the consumer price index rose 0.2 percent in September, leaving the 12-month increase at 1.2 percent, the smallest since April.

Signs of slowing were also apparent in data from Germany on Wednesday. German inflation slowed to 1.2 percent in October from 1.4 percent in September while unemployment rose for a third month in October by 2,000.

Other reports on Wednesday, however, showed that Europe as a whole is reflating. Spain's economy grew 0.1 percent in the third quarter, bringing its two-year recession to an end. The European Commission's economic sentiment index rose to 97.8 in October from 96.9 in September.

Japan's recovery also appears to be maintaining momentum. A report on Wednesday showed that industrial production there rebounded 1.5 percent in September after having fallen 0.9 percent in August. And on Thursday, Markit reported that its manufacturing PMI for Japan rose to 54.2 in October, the highest level since May 2010, from 52.5 in September.

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