Gently does it. As expected the European Central Bank is preparing for a softly-softly implementation of its exit strategy. Jean-Claude Trichet, president, has just dropped a pretty big hint that next month’s offer of unlimited one-year liquidity will be the last. What remains unclear is whether the ECB will also impose a spread on December’s operation. Trichet gave no clues, referring instead to the central bank’s December rendez-vous. In the meantime, he stepped up (again) his warnings about fiscal irresponsibility by governments, and inserted a line about premature tax cuts – but denied his words were directed at Germany in particular.
Lots of central bank news: the Bank of England extends QE by £25bn in what is seen as a “gradual decline” of the programme, and there are rumours that the ECB could begin exiting part of its stimulus as early as December. The Fed statement yesterday was largely unchanged. Read more
The Bank of England has raised the total amount of quantitative easing by £25bn to £200bn. This should be seen as a gradual ending of the flow of QE, with gilt purchases over the next three months now considerably slower than the issuance of new government paper, writes Chris Giles of the Financial Times. The MPC has also revised again how it believes QE is working and made dovish comments about inflation. Read more
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