Faster Fed taper, earlier rate hikes in sight as unemployment falls
Federal Reserve policymakers look likely to accelerate the winddown of their bond-buying program when they meet later this month as they respond to a tightening labor market and move to open the door to earlier rate hikes than they had projected.
U.S. employers added 210,000 jobs last month, a U.S. Labor Department report showed Friday, less than half of what economists had expected. But average hourly earnings over the past 12 months rose 4.8%, the unemployment rate dropped to 4.2%, and the workforce grew by the most in 13 months. Analysts said they believe the moderate job gains understate labor market strength and that they would likely be revised upward.
St. Louis Fed President James Bullard took the moment to intensify his call for faster action by the Fed's policy-setting panel, and said that rapidly strengthening economic data was making more of his colleagues comfortable with the idea of speeding up the bond-buying taper and laying the groundwork for a liftoff from zero rates. In September a slight majority of the Fed's 18 policymakers thought a rate hike would not be warranted until at least 2023.
"The danger now is that we get too much inflation... it's time for the (Fed) to react at upcoming meetings" Bullard said, arguing that the Fed should finish its bond program by March, and reiterating his view the central bank should raise rates at least twice next year.
"The inflation numbers are high enough that I think (ending the taper by March) would really help us to create the optionality to do more if we had to, if inflation doesn't dissipate as expected in the next couple of months," he told reporters.
"We think the Fed will view the economy as near full employment," Barclays economists wrote in a note, adding that not only do they expect the central bank to speed up its taper in December, but also to begin raising rates in March.
Interest-rate futures traders are pricing in a rate increase in June, with two more by the end of 2022.
Economists at Goldman Sachs noted following the report that the survey response rate that feeds into the payrolls number was the lowest for a November in 13 years. Several months this year have seen upward revisions in later readings, owing in part to the difficulty of data collection during the pandemic. From May through September, 748,000 more jobs were created than reported in the Labor Department's initial estimate.
Bullard echoed that in comments to reporters, adding he expected upward revisions to the payrolls number.
Reference: Reuters
Read More: Faster Fed taper, earlier rate hikes in sight as unemployment falls | Reuters
Thai
Eng