Yesterday and Today: Stocks were up again yesterday. A reduction in bond purchases could be announced by September but “that depends on what the next two jobs reports do,” Fed Governor Christopher Waller said.
The spreading of the delta variant is sparking new corporate policies on masks and vaccination requirements, and upending Wall Street’s return-to-office drive.
The U.S. Senate is heading toward a weekend vote on its $550 billion infrastructure legislation, in part thanks to the unresolved issue on how to modify a provision of the bill on reporting requirements for cryptocurrency transactions for tax collections.
What’s It Mean: Waller’s comments yesterday are typical of jawboning by Fed salesmen. Marc Chandler says:
The newest Fed Governor Waller may have spoken for others when he said that another couple of strong employment reports would allow the Fed to announce tapering before the end of the year. Unfortunately, it probably overstates the linkage. First, Chair Powell has gone to lengths to explain that, unlike the price stability target, the Fed targets the PCE headline deflator, but there is no one indicator of maximum employment.
Second, average monthly private sector nonfarm payroll growth slowed slightly in Q2 from Q1 (468k vs. 489k). Still, most Fed officials recognize that there has been progress toward meeting the conditions to allow a discussion about the pace and composition of the bond purchases. Note that the four-week moving average of weekly initial jobless claims was unchanged in July from June (394k). Yes, a million jobs a month would be great, but wouldn’t an average of 500k a month allow the Fed to taper? To say the same thing, it seems that the consensus may have the burden of proof wrongly placed on needing strong jobs growth for the Fed to taper, rather than the barring falling off the current trajectory, the Fed will taper later this year or early next year. It is that “or” that seems to be what is dividing the hawks and doves. -Source
The event that triggers the tapering event is gray. The Fed controls the Gray. It’s that simple. Everything else is noise. We’d all be better off if their microphones were turned off. Read the 2 screen caps in the tweet below if you have doubts.