Elsewhere, the US Federal Reserve met in late October and, as part of its decision to keep rates on hold, also announced that it had lowered its economic growth forecast for the country for the next couple of years. While some viewed this downgrade as a surprise, our take is that the Fed was merely catching up with consensus forecasts that had previously taken a dimmer view of the US economy.

 

Given the Fed’s comments, it appears the central bank may be paving the way for an additional round of quantitative easing (QE3). The Fed has been extremely active in recent years and while the central bank’s programmes may have prevented a more serious economic disaster, it has failed to deliver the sort of decent economic growth and sharply decreasing unemployment that is typical during the early stages of economic recoveries. To a large extent, this is due to the fact that consumers are still at a deleveraging stage and overall confidence levels remain depressed, which is preventing businesses from hiring.