Slower U.S. job gains may prove no barrier for faster Fed taper

Slower U.S. job gains may prove no barrier for faster Fed taper

Slower U.S. job gains may prove no barrier for faster Fed taper

(Reuters) – Federal Reserve policymakers look likely to accelerate the winddown of their bond-buying program when policymakers meet later this month, despite November job gains that came in short of expectations, as they move to take out insurance in case inflation does not recede next year as expected.

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%, and the unemployment rate dropped to 4.2%.

The Fed has kept interest rates near zero since March 2020. Last month, citing substantial progress in the labor market and higher-than-expected inflation, the Fed began reducing its $120 billion in bond purchases each month on a pace that would end them entirely by June 2022.

But Fed Chair Jerome Powell and other policymakers speaking in recent weeks have noted persistently high inflation and strong jobs gains. Powell said that at the Fed’s next policy meeting on Dec. 14-15 they would consider speeding up the taper by a few months to allow for potentially earlier monetary policy tightening if needed.

“This doesn’t do anything to derail the Fed from a faster taper,” said Sameer Samana, senior global market strategist at Wells Fargo (NYSE:) Investment Institute, calling the jobs report “solid.” “I’m not sure there’s anything here that would change their mind.”

On Friday, in remarks delivered to the Missouri Bankers Association, St. Louis Fed President James Bullard called for the central bank to consider removing accommodation faster in upcoming meetings, citing what he called the “inflation shock” of 2021.

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