Fed Watch

Soft August Data Likely Pushes Back Taper; Progressives Take Aim At Powell

The headline from 30,000 feet about Jay Powell’s virtual Jackson Hole speech was that the Significant Further Progress (SFP) criteria had been met for inflation but had not yet been attained in the labor market. Several Fed officials, including Lael Brainerd, had commented they would need to see more employment data and the effect of the Delta variant before moving forward.

The jobs report that came in this morning was, on its face, a huge miss. There was a difference of more than 500,000 between the estimate and the actual number. Many commentators have seen that as a reprieve to the Doves. It certainly proved prescient the prediction by our Head of Research, Tom Lee, that “bad news is good news,” given that it will likely result in an extension of accommodative policy.

This certainly seems to be the result of the soft numbers this morning. While certain surveys and the increasing volume of hawkish views from Regional Bank Presidents had begun to support the notion of an imminent taper, the smart money now appears to think November or December is more likely than September or October for the initial announcement of the taper timeline. We mentioned above how there was actually some bullish sub-text to this report. It wasn’t as bad as it seemed, which seems bullish....

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