Markets without synthetic support become stronger
The end of QE 2 (Quantative Easing) by the US Federal Reserve (Fed) in June has the markets worried about liquidity. The Fed is coming to the end of a programme of purchasing of USD 600 billion of US treasuries.
Arjun Parthasarathy
The end of Quantative Easing (QE2) by the US Federal Reserve (Fed) in June has the markets worried about liquidity. The Fed is coming to the end of a programme of purchasing of USD 600 billion of US treasuries. It has indicated that the programme will not be continued after June though the policy stance of the Fed remains accommodative. Equity, bond, commodity and currency markets will now have to contend with the absence of primary liquidity infused by the Fed and the markets are becoming nervous on the back of the expected withdrawal effects. China, which has been leading global growth over the past 10 years, is tightening its policies to curb asset bubbles and inflation. It has seen a property boom where prices have been on a sustained upward trend over the past many years (prices have risen by over 300% over the last five years).Prices are continuing to rise by 10-20% depending on the area year-on-year. Inflation as measured by the Consumer Price Index (CPI) is trending at 5% levels, way above policy-markers
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