Fed Sticks with Plan to End QE3 This Month

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  • TEMPO.CO, Boston – The Federal Reserve said it would stick with its plan to stop buying back bonds at the end of October. The central bank's decision to end its third quantitative easing program (QE3) is expected to be made during its leaders meeting on October 28 and 29, despite America's turbulent stock and bond market.

    To the Financial Times, Fed's leading official said that the central bank should end its asset purchases on schedule at the end of October unless "something dramatic happens".

    Meanwhile, president of the Boston Fed Eric Rosengren said Fed's asset purchases have achieved their stated goal, the jobs report for September already in, and his economic forecasts have not changed. "There has been substantial improvement in labor markets. As a result I would be pretty comfortable [ending purchases] at the end of the month," he told the Financial Times yesterday.

    The Fed began its third round of quantitative easing in September 2012, purchasing asset-backed bonds and long-term treasuries. They lowered long-term interest rates to almost zero percent in order to fuel a flagging economy following the 2008 recession. In September 2014, the Fed said they would end the QE3 in October.

    Rosengren said that on Fed's leadership meeting next week, there is a small chance that September's decision will be changed. However, given the capital market turmoil that caused the US stock market to crash last week, Rosengreen said that the Fed should not rush to increase interest rates.

    Indonesia Stock Exchange director Ito Warsito said the domestic stock market will not be affected much by Fed's interest hike. He is optimistic that the impact will be minimal, because the growth of Indonesia's economy, as well as listed companies' performances, is well maintained.