Central banks: towards the gradual withdrawal of monetary support
The Fed did not meet in October. Nevertheless, the minutes of its September meeting were released and clearly indicate that a reduction in quantitative easing will be announced at its early November meeting. The Fed's net purchases will likely end in mid-2022, just before the first-rate hike that the market expects to take place in September 2022. The ECB left its key rates unchanged in October and maintained a slightly lower pace of net asset purchases under the PEPP (Pandemic Emergency Purchase Program) than in the second and third quarters of this year. Indeed, the ECB believes that despite the rise in bond yields, financing conditions in the euro area remained favorable. At the press conference, C. Lagarde made it clear that the conditions for a rate hike were not yet in place. The Central Bank of New Zealand raised rates for the first time in seven years, following the lead of Norway and South Korea. Other central banks have signaled their intention to tighten monetary policy, such as the Bank of England. The central bank of Australia refused to defend its 0.10% bond yield target on 3-year bonds - one of the pillars of its quantitative easing program - which triggered a violent rise in the country's sovereign bond yields. The yield on the government bond maturing in April 2024 jumped to 0.8 per cent. The Bank of Canada also surprised investors earlier in the month by signaling an abrupt halt to its bond-buying program. In Brazil, the central bank accelerated the pace of monetary tightening in response to the significant rise in inflation. Its monetary policy committee unanimously voted to raise the benchmark rate by 1.5 per cent, compared with one per cent increases at the previous two meetings, bringing the Selic benchmark rate to 7.75 per cent.