The US Federal Reserve stunned markets this week by maintaining US$85 billion of quantitative easing (QE) asset purchases a month, confounding consensus estimates that monetary policy normalisation would begin this month, as a positive reflection of the recovery under way in the US economy.
The Fed’s balance sheet will thereby continue to grow, having risen from about US$1 trillion when QE began in 2009, to almost $4tn this year, with a reduction in asset purchases likely to now take place over a more drawn-out timetable, and probably not ending completely until nearer to the end of next year. An interest rate rise in the US also appears to be a prospect for further out, with an eventual unwinding of the QE already in the system not expected to occur for a number of years to come.
The message for financial markets in general and for equities in particular would seem to be a positive one in the first instance, in that the monetary stimulus taps will remain on for much longer than previously assumed. This is also an encouraging signal for emerging markets, which have suffered over the summer as fears grew that QE was about to come to an end. However, there are also significant risks that stem from delaying the exit from QE, especially given the uncertainty created by the Fed appearing to change direction.
In refusing to taper this week, the Fed was clearly fearful of a tightening of financial conditions, which if sustained could slow the pace of economic improvement. The main concerns here appear to have been the recent rise in bond yields, to almost 3.0 per cent for 10-year US treasuries, and the accompanying rise in mortgage rates since the Fed chairman, Ben Bernanke, started talking about reducing the stimulus in May. The Fed also expressed some fears over fiscal policy, a reference perhaps to the debt ceiling talks that will be taking place next month, with political wrangling in Washington having the potential to spook markets further.
The Fed maintained its zero to 0.25 per cent main policy interest rate and much of its previous forward guidance, while it expressed concern about the risk of inflation staying below 2 per cent. The Fed also left its 6.5 per cent unemployment and 2.5 per cent inflation thresholds intact, although Mr Bernanke noted that the unemployment rate may need to fall “considerably” below its 6.5 per cent threshold before the central bank starts raising interest rates. Unsurprisingly given the lack of tapering action this month, the Fed cut its near-term growth forecasts, with its projections for the target Fed funds interest rate showing only a modest rise in 2015. Growth in 2016 is expected to be stronger, but the Fed funds rate is expected to be still well below its long-term average.
Meanwhile the Fed continued to emphasise the data-dependent nature of any decision to moderate asset purchases. While the initial market reaction was unsurprisingly euphoric, with equities rallying to all-time highs, bond yields falling and the US dollar also losing ground, the Fed’s message might be seen as raising more questions than it answers.
Indeed the longer-term reaction may not be quite so straightforward. The Fed has placed a great deal of store by the need to communicate effectively with the financial markets through its relatively new policy tool known as forward guidance. Given that the Fed had appeared to set up the market to expect a reduction in stimulus this month (since Mr Bernanke’s last press conference in June, and with the economy meeting much of the criteria laid out since then), the fact that they did not will raise questions about the worth of this forward guidance, leaving markets confused about the outlook for monetary policy. In particular, Mr Bernanke’s previous assertion that QE would be more or less completed when the unemployment rate reaches 7.0 per cent was hardly mentioned this week. The next focus for Fed tapering will probably fall on the Fed’s December meeting (when another press conference is to be held), but it could even be pushed back further into next year given what Mr Bernanke said.
Furthermore, the lack of a QE taper may actually damage the US economy, by raising questions about the strength of the recovery to date and damaging consumer and business confidence in the process. The fact that the Fed downgraded its growth forecasts makes it a little curious that the equity markets took the news quite so positively. The Fed’s credibility might also suffer as a consequence which could create a more volatile performance by major markets. In particular, to the extent that equity markets received a significant boost from the Fed’s message this week, any eventual tightening could contribute to a much bigger bust later. Likewise, should growth improve and inflationary pressures begin to emerge, US treasury bonds could be punished even more heavily down the road because of the Fed’s current caution.
Undoubtedly the Fed’s inaction will be received positively by emerging markets around the world, and this region should be no exception. The GCC states have already demonstrated resilience as the developed world has stuttered, with regional growth rates firm, and its financial markets among the best performers globally this year. The postponement of monetary withdrawal in the US should keep regional optimism positive for now, as interest rates remain low for longer. But of course postponed is not the same as removed, and all the world’s markets should remain aware that the longer-term risks have probably increased, not diminished, as a result of the Fed’s inaction.
Tim Fox is the head of research and chief economist at Emirates NBD but is writing here in a personal capacity
RESULTS
5pm Maiden (PA) Dh80,000 (Turf) 1,600m
Winner Thabet Al Reef, Bernardo Pinheiro (jockey), Abdallah Al Hammadi (trainer)
5.30pm Handicap (PA) Dh80,000 (T) 1,600m
Winner Blue Diamond, Pat Cosgrave, Abdallah Al Hammadi
6pm Arabian Triple Crown Round-1 Listed (PA) Dh230,000 (T) 1,600m
Winner Hameem, Adrie de Vries, Abdallah Al Hammadi
6.30pm Wathba Stallions Cup Handicap (PA) Dh70,000 (T) 1,400m
Winner Shoja’A Muscat, Szczepan Mazur, Ibrahim Al Hadhrami
7pm Maiden (PA) Dh80,000 (T) 1,200m
Winner Heros De Lagarde, Szczepan Mazur, Ibrahim Al Hadhrami
7.30pm Handicap (TB) Dh100,000 (T) 2,400m
Winner Good Tidings, Antonio Fresu, Musabah Al Muhairi
The%20US%20Congress%20explained
%3Cp%3E-%20Congress%20is%20one%20of%20three%20branches%20of%20the%20US%20government%2C%20and%20the%20one%20that%20creates%20the%20nation's%20federal%20laws%3C%2Fp%3E%0A%3Cp%3E-%20Congress%20is%20divided%20into%20two%20chambers%3A%20The%20House%20of%20Representatives%20and%20the%20Senate%3C%2Fp%3E%0A%3Cp%3E-%C2%A0The%20House%20is%20made%20up%20of%20435%20members%20based%20on%20a%20state's%20population.%20House%20members%20are%20up%20for%20election%20every%20two%20years%3C%2Fp%3E%0A%3Cp%3E-%20A%20bill%20must%20be%20approved%20by%20both%20the%20House%20and%20Senate%20before%20it%20goes%20to%20the%20president's%20desk%20for%20signature%3C%2Fp%3E%0A%3Cp%3E-%20A%20political%20party%20needs%20218%20seats%20to%20be%20in%20control%20of%20the%20House%20of%20Representatives%3C%2Fp%3E%0A%3Cp%3E-%20The%20Senate%20is%20comprised%20of%20100%20members%2C%20with%20each%20state%20receiving%20two%20senators.%20Senate%20members%20serve%20six-year%20terms%3C%2Fp%3E%0A%3Cp%3E-%20A%20political%20party%20needs%2051%20seats%20to%20control%20the%20Senate.%20In%20the%20case%20of%20a%2050-50%20tie%2C%20the%20party%20of%20the%20president%20controls%20the%20Senate%3C%2Fp%3E%0A
COMPANY PROFILE
Company name: Blah
Started: 2018
Founder: Aliyah Al Abbar and Hend Al Marri
Based: Dubai
Industry: Technology and talent management
Initial investment: Dh20,000
Investors: Self-funded
Total customers: 40
Kanguva
Director: Siva
Stars: Suriya, Bobby Deol, Disha Patani, Yogi Babu, Redin Kingsley
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
Mobile phone packages comparison
THE SPECS
Touareg Highline
Engine: 3.0-litre, V6
Transmission: 8-speed automatic
Power: 340hp
Torque: 450Nm
Price: Dh239,312
Barbie
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SPEC%20SHEET%3A%20APPLE%20M3%20MACBOOK%20AIR%20(13%22)
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Why are you, you?
Why are you, you?
From this question, a new beginning.
From this question, a new destiny.
For you are a world, and a meeting of worlds.
Our dream is to unite that which has been
separated by history.
To return the many to the one.
A great story unites us all,
beyond colour and creed and gender.
The lightning flash of art
And the music of the heart.
We reflect all cultures, all ways.
We are a twenty first century wonder.
Universal ideals, visions of art and truth.
Now is the turning point of cultures and hopes.
Come with questions, leave with visions.
We are the link between the past and the future.
Here, through art, new possibilities are born. And
new answers are given wings.
Why are you, you?
Because we are mirrors of each other.
Because together we create new worlds.
Together we are more powerful than we know.
We connect, we inspire, we multiply illuminations
with the unique light of art.
Ben Okri,
((Disclaimer))
The Liechtensteinische Landesbank AG (“Bank”) assumes no liability or guarantee for the accuracy, balance, or completeness of the information in this publication. The content may change at any time due to given circumstances, and the Liechtensteinische Landesbank AG is under no obligation to update information once it has been published. This publication is intended for information purposes only and does not constitute an offer, a recommendation or an invitation by, or on behalf of, Liechtensteinische Landesbank (DIFC Branch), Liechtensteinische Landesbank AG, or any of its group affiliates to make any investments or obtain services. This publication has not been reviewed, disapproved or approved by the United Arab Emirates (“UAE”) Central Bank, Dubai Financial Services Authority (“DFSA”) or any other relevant licensing authorities in the UAE. It may not be relied upon by or distributed to retail clients. Liechtensteinische Landesbank (DIFC Branch) is regulated by the DFSA and this advertorial is intended for Professional Clients (as defined by the DFSA) who have sufficient financial experience and understanding of financial markets, products or transactions and any associated risks.
Dust and sand storms compared
Sand storm
- Particle size: Larger, heavier sand grains
- Visibility: Often dramatic with thick "walls" of sand
- Duration: Short-lived, typically localised
- Travel distance: Limited
- Source: Open desert areas with strong winds
Dust storm
- Particle size: Much finer, lightweight particles
- Visibility: Hazy skies but less intense
- Duration: Can linger for days
- Travel distance: Long-range, up to thousands of kilometres
- Source: Can be carried from distant regions
The biog
Hobby: Playing piano and drawing patterns
Best book: Awaken the Giant Within by Tony Robbins
Food of choice: Sushi
Favourite colour: Orange
The%20specs
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%3Cp%3E%3Cstrong%3ETHE%20SPECS%3C%2Fstrong%3E%0D%3Cbr%3EEngine%3A%203.5-litre%20V6%0D%3Cbr%3ETransmission%3A%209-speed%20automatc%0D%3Cbr%3EPower%3A%20279hp%0D%3Cbr%3ETorque%3A%20350Nm%0D%3Cbr%3EPrice%3A%20From%20Dh250%2C000%0D%3Cbr%3EOn%20sale%3A%20Now%3C%2Fp%3E%0A
The%20specs
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SPAIN SQUAD
Goalkeepers Simon (Athletic Bilbao), De Gea (Manchester United), Sanchez (Brighton)
Defenders Gaya (Valencia), Alba (Barcelona), P Torres (Villarreal), Laporte (Manchester City), Garcia (Manchester City), D Llorente (Leeds), Azpilicueta (Chelsea)
Midfielders Busquets (Barcelona), Rodri (Manchester City), Pedri (Barcelona), Thiago (Liverpool), Koke (Atletico Madrid), Ruiz (Napoli), M Llorente (Atletico Madrid)
Forwards: Olmo (RB Leipzig), Oyarzabal (Real Sociedad), Morata (Juventus), Moreno (Villarreal), F Torres (Manchester City), Traore (Wolves), Sarabia (PSG)
SPECS
Engine: 4-litre V8 twin-turbo
Power: 630hp
Torque: 850Nm
Transmission: 8-speed Tiptronic automatic
Price: From Dh599,000
On sale: Now
Read more from Aya Iskandarani
Water waste
In the UAE’s arid climate, small shrubs, bushes and flower beds usually require about six litres of water per square metre, daily. That increases to 12 litres per square metre a day for small trees, and 300 litres for palm trees.
Horticulturists suggest the best time for watering is before 8am or after 6pm, when water won't be dried up by the sun.
A global report published by the Water Resources Institute in August, ranked the UAE 10th out of 164 nations where water supplies are most stretched.
The Emirates is the world’s third largest per capita water consumer after the US and Canada.
Avatar: Fire and Ash
Director: James Cameron
Starring: Sam Worthington, Sigourney Weaver, Zoe Saldana
Rating: 4.5/5
Biography
Favourite drink: Must have karak chai and Chinese tea every day
Favourite non-Chinese food: Arabic sweets and Indian puri, small round bread of wheat flour
Favourite Chinese dish: Spicy boiled fish or anything cooked by her mother because of its flavour
Best vacation: Returning home to China
Music interests: Enjoys playing the zheng, a string musical instrument
Enjoys reading: Chinese novels, romantic comedies, reading up on business trends, government policy changes
Favourite book: Chairman Mao Zedong’s poems
'Midnights'
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The Gandhi Murder
- 71 - Years since the death of MK Gandhi, also christened India's Father of the Nation
- 34 - Nationalities featured in the film The Gandhi Murder
- 7 - million dollars, the film's budget
