US Fed expected to end stimulus programme

The Fed is expected to announce later today that the US quantitative easing programme is coming to an end.

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By :  ,  Financial Analyst

US stocks remained flat this morning (October 29th), as investors await a statement from the US Federal Reserve, which is expected to announce the end of its quantitative easing programme.

The Dow Jones industrial average edged up 0.21 per cent to 17,041.55 at 10:20 ET, while the S&P 500 gained 0.21 per cent, to 1,989.14 and the Nasdaq Composite dropped or 0.18 per cent, to 4,555.90.

In recent months, the Fed's main policy making committee has been gradually cutting back its stimulus programme, which started in 2008. The markets are widely expecting that the end of the scheme will be announced today, as the US economy has shown signs of a durable recovery, and unemployment is now below six per cent.

In total, the Fed has added $3.7 trillion (£2.3 trillion) worth of assets to its holdings.

“The exit protocol has been so well documented for the last nine months that the market has fully priced it in,” Barbara J. Cummings, who manages a $3.5 billion fixed-income portfolio for the Boston Private Bank & Trust Company. told the New York Times.

“I don’t anticipate any movement. I feel as though this is one meeting where they almost don’t need to hold it because they have made it perfectly clear.”.

Senior Fed officials argue that the programme prevented a much worse downturn, and that unemployment is lower and economic activity higher than they would otherwise have been, the BBC reports.

The Fed next plans to enter a final phase in which it will maintain the size of the bond portfolio and keep short-term interest rates near zero. Fed officials have hinted that a rate increase is likely to happen in the middle of 2015.

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