Labour data eases fears over Fed plans to end QE
Bloomberg in Washington
Most US stocks inched up yesterday after fresh data showed steady gains in jobs while the jobless rate stayed at a level that's unlikely to hasten the end of the Federal Reserve stimulus.
Minutes of Fed meetings earlier showed concern over the swelling balance sheet could end the bond-buying programme, or quantitative easing (QE), as early as this year.
US employers added workers in December at about the same pace as in the prior month. Payrolls rose by 155,000 last month following a revised 161,000 advance in November. The unemployment rate held at 7.8 per cent, matching the lowest since December 2008.
The jobs report "reinforces the view that the labour market is healing but at a very slow pace," said Joseph Tanious, a New York-based global market strategist for JPMorgan Funds.
"It's a good report that suggests the economy is healing but it's not so good that the Fed might pull out of QE. It's been a shortened week but jam-packed and everybody's still digesting everything."
"Several" members of the Federal Open Market Committee (FOMC) said it would "probably be appropriate to slow or stop bond purchases well before the end of 2013", according to minutes of their December 11-12 meeting released on Thursday.
A "few" members were willing to let the programme run to the end of the year, while "a few others" didn't give a time frame.
Chairman Ben Bernanke is exploring the timing for concluding his four-year campaign to cut borrowing costs and combat unemployment through unorthodox monetary easing. The FOMC minutes reveal concern over the challenge of shrinking a balance sheet that may grow to more than US$4 trillion while potentially distorting financial markets and providing less kick to growth.
"It does sound like they are having a little bit of a gut check," said Michael Feroli, chief US economist at JPMorgan Chase in New York. "Maybe they stared into the abyss and didn't like the prospect of a US$5 trillion to US$6 trillion balance sheet."
The mention of a calendar-date end to accommodation surprised investors after Bernanke said at a December 12 press conference that the Fed would continue its US$85 billion-a-month bond-buying programme until officials see "substantial improvement in the outlook for the labour market".