he Federal Reserve, facing a labor market that may be stalling or on the cusp of a surge, is expected next week to open the door to reducing its monthly bond purchases while tying any actual change to U.S. job growth in September and beyond.
Fed officials, including Chair Jerome Powell, have said the U.S. central bank's $120 billion in monthly bond purchases could be scaled back later this year as a first step towards ending the crisis-era policies implemented in the spring of 2020 as the coronavirus pandemic was taking hold.
But after an unexpectedly weak gain of 235,000 jobs in August, officials will want to keep their options open, ready to reduce bond purchases as soon as the Nov. 2-3 policy meeting if employment growth rebounds and COVID-19 risks recede, but able also to delay any "taper" if the virus hinders the recovery.
More than 60% of economists expect the first change in bond purchases to take place in December, according to the latest Reuters poll, which also showed them cutting their forecasts for 2021 economic growth.
That dilemma raises the stakes for the next U.S. employment report, which is due to be released on Oct. 8. That data is likely to show whether the Delta variant of the coronavirus is having a deeper impact than Fed officials anticipated earlier in the summer when they said the economy appeared to be divorcing itself from the pandemic.
The Fed will hold its next policy meeting on Tuesday and Wednesday, a session that will include the release of fresh economic projections and a new read on officials' interest rate expectations. The projections will incorporate a volatile summer of data that included job gains of nearly 1 million in both June and July before the dropoff in August, unexpectedly strong inflation numbers, and a surge of COVID-19 infections and deaths that eclipsed last summer's viral wave.
Reference: Reuters
Read More: https://www.reuters.com/business/finance/november-december-feds-taper-timeline-tied-volatile-jobs-data-2021-09-17/
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