Why the Fed Needs to Taper Now in Spite of Weak Jobs Report
The Federal Reserve will need to make a big decision soon, prior to its Federal Open Market Committee (FOMC) meeting in mid-September, regarding the continuation of its monetary policy. Before Friday’s non-farm payrolls report, the decision was somewhat easy to make on the heels of positive economic data and a good second-quarter gross domestic product (GDP) reading. The initial claims for the most recent week were the lowest since before the recession.
The futures market was betting on the Federal Reserve beginning to rein in its bond buying at the September meeting; even the Federal Reserve’s Beige Book pointed to tightening.
But then the market was surprised when the non-farm payrolls showed a muted 169,000 new jobs in August and worse yet, the July reading was revised downward by 36% to a horrible 104,000. What the heck happened with the U.S. Department of Labor? Maybe a case of sticky fingers?
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