Unemployment threshold for Fed taper may be adjusted lowerNovember 06, 2013 Posted by: Pete Karabatos
Two separate Fed staff research papers were posted on the IMF’s website in advance of the conference that starts tomorrow in Washington. These papers indicate that maintaining a loose policy in a time of low inflation expectations is effective for driving down unemployment and economic slack. William English, head of the Division of Monetary Affairs, wrote that not raising rates until unemployment is below 6.5% is an effective stimulus and further indicated that a lower threshold may also be helpful. With the central bank currently discussing the timing of a tapering in the $85 billion per month bond purchase program, the papers provides a glimpse into the current mindset of the Fed and increase the probability that the 6.5% unemployment threshold will be lowered. Any decision to delay tapering would likely lead to a significant run up in stock and bond prices and may be somewhat negative for the USD.
• Former Treasury Secretary Summers predicts that the U.S. will not experience another round gridlock in budget negotiations. He stated that “those who shoot themselves in the foot rarely do it again” therefore “it is unlikely that we will reach the brink of default again.”
• The GBP is trading higher for the third day after U.K. industrial production rose by .9% in September, besting the .6% estimate of global economists surveyed by Bloomberg.
• Eurozone services PMI came in at 51.6 vs. estimates of 50.9. This indicates that the region’s economic recovery may be gaining some momentum and is positive for the EUR.
• The NZD is trading at near 2 week highs after stronger than expected employment figures.
11/07 USD: GDP Annualized 3Q
11/07 EUR: ECB Announces Interest Rates
11/07 USD: Core PCE 3Q
11/08 USD: Non-farm Payroll (Oct.)
11/08 USD: Unemployment Rate (Oct.)
11/08 CAD: Unemployment Rate (Oct.)
11/11 GBP: RICS House Price Balance (Oct.)
11/12 GBP: PPI and CPI (Oct.)
11/12 USD: NFIB Small Business Optimism (Oct.)
11/06 EUR: Retail Sales (Sept.)
11/06 GBP: Industrial/Manufacturing Production (Sept.)
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