Fed Could Taper QE if Economy Adds 200 K Payrolls for 4 months

According to two former Fed economists, Fed officials may have adopted a threshold regarding the labor market before tapering the bond-buying program. Official need to see four months of job growth averaging at least 200,000 to justify reducing the pace of asset purchases.

 

More details from Bloomberg:

 

The Federal Reserve says it will keep buying bonds until the labor market has “improved substantially,” without defining the phrase. Officials may have adopted a threshold nevertheless, say two former Fed economists.

 

Chairman Ben S. Bernanke needs to see four months of job growth averaging at least 200,000 to justify reducing the pace of asset purchases, according to Vincent Reinhart, a former director of the Fed’s Division of Monetary Affairs. Roberto Perli, a former researcher in the division, said the central bank would need to see that pace “through the summer.”

 

In these conditions, investors should look closely at the nonfarm payrolls of May but also the revisions of March and April. Remind that first estimates shows that these two data were weak with only 138 K and 165 K jobs added.