Tuesday, 5 November 2013

Fed in no rush to taper amid mixed economic data, Europe continues to recover

Tapering of the Federal Reserve's asset purchases may be a while in coming. From Reuters on Monday:

The Federal Reserve should scale back its asset purchases only when the U.S. economy shows clearer signs of improvement and even then it should act slowly, one senior central banker said on Monday, while two others stressed there is no need to rush...

Governor Jerome Powell called the timing "necessarily uncertain" because it depends on the strength of the recovery, while Boston Fed President Eric Rosengren pointed to the central bank's balance sheet as a reason to be patient as it heads into a policy meeting next month...

"For me, you don't have to be in a hurry because of low inflation," St. Louis Fed President James Bullard ... told CNBC television.

US economic data on Monday were mixed.

A report on the Federal Reserve's latest quarterly senior loan officers survey showed that US banks have eased lending standards for commercial loans and residential mortgages in the last three months. However, the survey also found that demand had weakened for home mortgages while most banks reported a drop in mortgage refinancing activity.

US factory orders rose 1.7 percent in September after falling 0.1 percent in August. A surge in aircraft orders pushed up the total for September but orders for non-military capital goods other than aircraft fell 1.3 percent.

Elsewhere in the world, manufacturing in the euro area continued its recovery in October. Markit's manufacturing PMI rose to 51.3 last month, in line with its flash reading, from 51.1 in September.

In the UK, construction activity accelerated in October, the Markit/CIPS construction index rising to 59.4, the highest since September 2007, from 58.9 in September.

With the construction data continuing the recent stream of positive economic data for the UK, the outlook for the economy appears to have brightened. On Sunday, the Confederation of British Industry had raised its growth forecasts for the economy to 1.4 percent and 2.4 percent in 2013 and 2014 respectively, up from 1.2 percent and 2.3 percent previously.

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