NFP: Another reason for the Fed turning gradually more hawkish – Danske Bank
06.12.2021, 16:07

NFP: Another reason for the Fed turning gradually more hawkish – Danske Bank

Data released on Friday, showed the NFP rose by 210K below the 550K expected. According to analysts from Danske Bank, the weak jobs report is a sign of supply side problems, not lack of demand. They see the Fed increasing the tapering pace next week. 

Key Quotes: 

“In our view, employment growth is unlikely to be much stronger until we see more people returning back to the labour force. Labour demand remains high with still many job openings (especially within "leisure & hospitality", many businesses reporting hiring plans, consumers thinking it is easy to find a job and wage growth is still running at a high level.”

“The Federal Reserve is leaning more and more into the story that the labour market is hotter than what they thought just a few months back amid still high inflation. That is the reason why the Fed is turning gradually more and more hawkish. The most recent shift is Fed Chair Jerome Powell's signal that the Fed is considering hiking the tapering pace.”

“We recently changed our Fed call now expecting an increase of the tapering pace to USD25bn per month (from USD15bn per month currently) so that QE bond buying is set to end in April. We expect three 25bp rate hikes in 2022 (in June, in September and in December). We still see case for the Fed tightening sooner and faster than our base case.”
 

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