Article source: Sina Finance
The US non-farm payrolls report was unexpectedly weak last week, with job creation at a seven-month low in August, prompting analysts to increase their bets that the Fed will not scale back its stimulus package in the coming months.
Far from clearing the way for the start of the tapering process, the August report still leaves the Fed at risk of a new commitment to a full recovery in the labour market. The choice between these two opposing options is a difficult choice between a traditional commitment to keep inflation under control.
Blackrock, the world's largest asset manager, said in a recent article that the Fed is expected to announce cuts in November.
Blackrock said the Fed had set the condition for curtailing asset purchases as "substantial further progress" on inflation and employment targets. Jerome Powell, chairman of the Federal Reserve, admitted that inflation had met this condition, and that the final obstacle was employment.
Blackrock believes that the August employment data released on Friday showed that employment increased by 235000. Although much lower than expected, seasonal factors may play a role and may be revised upwards.
In any case, the asset management company noted that the increase was a step towards making up for the 2/3 loss of unemployment in December 2020-a level that some FOMC participants said could be sufficient to represent further substantial progress in employment.
"the strong data in September and October are likely to lead the Fed to announce a reduction in bond purchases in November-which is not impossible in our view, given that the additional unemployment benefits will end next month," Blackrock said.
As for raising interest rates, Blackrock pointed out, "the Fed stressed that the reduction in bond purchases is not a direct signal of a rise in policy rates, and we still do not expect policy rates to rise until 2023." "
Barclays analysts said: "Job growth slowed sharply in August, with few signs of accelerated labor supply, which puts the Fed in a dilemma as it tries to balance the risk of a sharp slowdown in demand with the risk of supply constraints and inflation. We still expect the Fed to signal a retrenchment in September, but it is now expected to start in December instead of November. QE is likely to end in mid-2022. "
The latest view of Societe Generale Research expects the Fed to formally announce a reduction in bond purchases in November and December. Until then, the dollar index may face downward pressure.
Strategists at Citigroup expect the dollar to weaken in the coming months as the Fed delays its stimulus package until November, but hedge funds have quietly increased their bullish bets.
Edit / yabo