Fed December Taper Odds Double in Survey as Jobs Beat Estimate
The Federal Open Market Committee will probably begin reducing $85 billion in monthly bond purchases at a Dec. 17-18 meeting, according to 34 percent of economists surveyed yesterday by Bloomberg, an increase from 17 percent in a Nov. 8 survey. In November, 53 percent predicted a tapering in March, compared with 40 percent in yesterday’s poll of 35 economists.
The jobless rate fell to a five-year low of 7 percent last month as payrolls swelled by 203,000 after a revised 200,000 increase in October, the Labor Department said yesterday. The November gain exceeded the 185,000 median forecast of 89 economists surveyed by Bloomberg.
“Clearly the economy is performing far better than the FOMC expected, and there’s no reason not to get started with tapering,” said James Smith, chief economist at Parsec Financial Management Inc. in Asheville, North Carolina, and a former economist at the Fed. He predicts the Fed will reduce monthly purchases to $65 billion in December.
The pickup in hiring -- the biggest gain in three months -- signals that companies are more confident demand will improve, while gains in wages and hours reported yesterday give American workers more reason to spend as holiday shopping gets under way. Stocks rallied on bets the economy is strong enough to withstand a reduction in the Fed’s bond buying.