Business & Investment

Fed tapering accelerates, employment growth slows, but rate hikes accelerate

Federal Reserve Policy makers will take out insurance in case inflation doesn’t recede as expected next year, despite lower-than-expected employment growth in November, when meeting later this month on the bond-buying program. May accelerate termination.

US employers added 210,000 jobs last month, less than half what economists expected, a report from the US Department of Labor said Friday. However, the average hourly wage for the last 12 months has risen by 4.8% and the unemployment rate has fallen to 4.2%.

Immediately after the report was released, St. Louis Federal Reserve System President James Bullard has stepped up a call for faster action by the Fed’s policy-making committee, the Federal Open Market Committee, and many of his colleagues are pleased with the idea of ​​accelerating the tapering of bond purchases. He said he was.

“The danger now is that inflation is too high,” Bullard said. “It’s time for the FOMC to react at upcoming meetings.”

The Federal Reserve Board has kept interest rates near zero since March 2020. Last month, due to significant labor market development and higher-than-expected inflation, the Federal Reserve began cutting $ 120 billion in monthly bond purchases at a pace that would completely end it. By June 2022.

But with inflation more than double the Fed’s 2% target and the risk that it won’t fall as soon as policymakers want next year, Fed Chair Jerome Powell said in December this week. Said at the next policy meeting. 14-15 They will consider speeding up the taper for months.

“This doesn’t derail the Fed from the faster taper,” said Samir Samana, senior global market strategist at the Wells Fargo Investment Institute, calling the employment report “solid.”

“I don’t know if there’s anything here that will change their minds.”

Lift off 6 months ago?

Bullard has been at the end of the Fed’s hawkish horizons for months, but in the past few weeks, many of his colleagues who want the option to raise interest rates at least before June have joined him. rice field.

Fed policy makers generally agree that interest rates near zero should begin to rise only after the Fed has stopped buying bonds.

Friday’s labor report showed the largest increase in labor force participation in 13 months, with women joining the workforce at the fastest rate since March.

“The Fed will see the economy as almost full employment,” said a Barclays economist, adding that he hopes the central bank will not only accelerate its taper in December, but also start raising rates in March. rice field.

Following the report, Goldman Sachs economists said the survey response rate reflected in salary numbers was the lowest in November in 13 years. In the months of this year, later measurements have been revised upwards due to the difficulty of collecting data during a pandemic.

Mr. Bullard repeated it in a comment to reporters, adding that he hopes for an upward revision in salary numbers.

Interest rate futures traders will raise rates in May, raising two more by the end of 2022. This would have wanted him the option to do more if inflation did not fall as expected.

Fed tapering accelerates, employment growth slows, but rate hikes accelerate Fed tapering accelerates, employment growth slows, but rate hikes accelerate

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