Investing.com - A decision by the Federal Reserve to begin
tapering the pace of its monthly asset purchases will become
increasingly likely if the labor market continues to improve, said
the head of the St. Louis Fed branch James Bullard on Monday.
The Federal Reserve is currently purchasing USD85 billion in
Treasury holdings and mortgage debt a month to spur recovery, a
monetary policy tool known as quantitative easing that drives down
long-term interest rates, thus weakening the dollar.
The labor market is showing signs of improvement, which makes the
prospect of tapering more likely in the near future, Bullard said
in a speech on Monday.
"A small taper might recognize labor market improvement while still
providing the Committee the opportunity to carefully monitor
inflation during the first half of 2014," Bullard said.
"Should inflation not return toward target, the Committee could
pause tapering at subsequent meetings," he added.
On Friday, the Department of Labor said the U.S. economy added
203,000 jobs in November, beating expectations for a 180,000
increase and up from a downwardly revised 200,000 rise the previous
In the private sector, 196,000 jobs were added last month compared
to expectations for a 180,000 rise, after an increase of 214,000 in
The report also said the U.S. unemployment rate fell to 7.0% in
November, from 7.3% in October, beating expectations for a downtick
Many market participants expect the Fed to announce plans to taper
its USD85 billion in monthly asset purchases in early 2014 if not
at the Fed's Dec. 17-18 monetary policy meeting.
Either this month or early next year, the chances of a Fed decision
to wind down the stimulus program is growing.
"Based on labor
alone, the probability of a reduction in the pace of asset
purchases has increased," Bullard said.
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