The Fed left its monetary policy unchanged, and its statement was so hardly modified that it is difficult to spot the differences with the September one. The reference to tightened financial condition has disappeared, and the slightly different wording of the first paragraph could illustrate that members are less confident about the strength of the recovery
There was no suspense about the decision FOMC members would make at today’s meeting, and the absence of change in the monetary policy stance came as a no surprise.
■ In September, some were highly surprised that the Fed did not announce a slowdown in monthly security purchases (QE3), and still were expecting the decision to come before the end of the year.
■ We were not surprised in September, as the labour market conditions deteriorated markedly over the summer. As the Fed is seeking for a substantial improvement of those conditions, there is no reason to slowdown QE3 in the absence of such a development.
■ Admittedly, some members do worry about the potential risks on financial stability. Esther L. George has been a constant dissenter of FOMC decisions because of that very reason. With better conditions in early 2013, her and other members’ voices were heard more loudly, but the drop in monthly job creations somewhat silenced them.
■ The September labour market report showed that employment did not rebound in late summer. In October, they are very likely to have almost halted, as the CEA estimates the 16-day shutdown cut payrolls by 120,000. Sure, those lost jobs will be regained in November, but as showed by today’s ADP survey data, the momentum in the private economy does not look good.
■ To be able to have a clear view about where the labour market report is heading, FOMC members are very likely to wait until the December report. Yet, it would be better to wait until the release of the January report (early February). This is the main reason why we see the March FOMC meeting as the earliest date to announce a QE3 slowdown.
■ Without heading south, activity and employment indicators are not that well oriented. Actually, they seem to indicate that the sequester is having a much larger negative impact on the economy than previously thought. In short, the chances to see the Fed waiting beyond March 2014 to “taper” are non-negligible.
BY Alexandra ESTIOT
To Read the Entire Report Please Click on the pdf File Below.
There was no suspense about the decision FOMC members would make at today’s meeting, and the absence of change in the monetary policy stance came as a no surprise.
■ In September, some were highly surprised that the Fed did not announce a slowdown in monthly security purchases (QE3), and still were expecting the decision to come before the end of the year.
■ We were not surprised in September, as the labour market conditions deteriorated markedly over the summer. As the Fed is seeking for a substantial improvement of those conditions, there is no reason to slowdown QE3 in the absence of such a development.
■ Admittedly, some members do worry about the potential risks on financial stability. Esther L. George has been a constant dissenter of FOMC decisions because of that very reason. With better conditions in early 2013, her and other members’ voices were heard more loudly, but the drop in monthly job creations somewhat silenced them.
■ The September labour market report showed that employment did not rebound in late summer. In October, they are very likely to have almost halted, as the CEA estimates the 16-day shutdown cut payrolls by 120,000. Sure, those lost jobs will be regained in November, but as showed by today’s ADP survey data, the momentum in the private economy does not look good.
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■ To be able to have a clear view about where the labour market report is heading, FOMC members are very likely to wait until the December report. Yet, it would be better to wait until the release of the January report (early February). This is the main reason why we see the March FOMC meeting as the earliest date to announce a QE3 slowdown.
■ Without heading south, activity and employment indicators are not that well oriented. Actually, they seem to indicate that the sequester is having a much larger negative impact on the economy than previously thought. In short, the chances to see the Fed waiting beyond March 2014 to “taper” are non-negligible.
BY Alexandra ESTIOT
To Read the Entire Report Please Click on the pdf File Below.
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