One week before the Fed decision, there is more to support a decision on tapering bond buys in December after the better than expected Non-Farm Payrolls report.
Also the Fed’s favorite measure and the political scene seem set. Is the market pricing a decision on QE tapering? Not exactly.
JOLTS
Ben Bernanke is still the man behind the wheel in this FOMC decision, and he likes the JOLTS figure even though it is a lagging figure. For the month of October, which feature the US government shutdown, openings increased and reached the highest levels since 2008, 3.93 million.
While the Fed would probably like to see JOLTS crossing the 4 million mark, the figure is steadily and safely moving in the right direction. Employment is part of the Fed’s mandate.
Political Deal
16 days of government shutdown and a scare of debt default didn’t take the winds of the US economy’s sails, and another government shutdown has now been averted. Contrary to previous dealings, US politicians reached a deal on a budget ahead of schedule. Ryan and Murray agreed to avert a potential government shutdown in January and in October 2014.
Even if the a deal on the debt ceiling wasn’t reached (and the deadline is around February-March), there is a lot more certainty coming from the political scene. The surprising ability to reach a deal not in the last moment is hopefully a sign that the same will happen around the debt ceiling.
In hindsight, the Fed’s decision not to taper in September was justified by the government shutdown that began less than two weeks afterwards. A significant portion of that fear is now behind us.
So, is a “Dectaper” closer? It certainly seems so. Is the market complacent about it? Not exactly. It seems that markets aren’t certain about anything: a “Dectaper” will boost the dollar, and a lack of it will send it falling fast.
Further reading: 5 reasons for QE tapering in December – NFP Analysis