Fed still expected to hold off tapering until March even as jobs surge

Bloomberg News

Economists still forecast the Federal Reserve will delay tapering asset purchases until March even after a report Friday showed employers added more jobs than forecast in October.

Policy makers will pare the monthly pace of bond buying to $70 billion at their March 18-19 meeting from the current pace of $85 billion, according to the median of 32 economist estimates in a Bloomberg News survey. The median forecast in an Oct. 17-18 survey of 40 economists also called for a reduction to $70 billion in March.

The Federal Open Market Committee voted Oct. 30 to keep the pace unchanged, saying it needs more evidence of improvement in the economy. The jobs report probably isn't enough to convince policy makers that it's time to start tapering the quantitative easing program, said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut.

The strength of the payroll report “at least brings December back on the table, but in the end they're not going to have enough evidence to pull the trigger,” said Stanley, a former Richmond Fed researcher. “Part of the reason they keep putting off any pullback in accommodation is that they're continually disappointed in the outlook.”

Employers added 204,000 workers in October, according to the Labor Department report, compared with a median estimate of a 120,000 gain in a Bloomberg survey of economists. Revisions increased the job gains for the prior two months by a total of 60,000. The jobless rate rose to 7.3% from almost a five-year low of 7.2%.

MARCH PREDICTION

The report “makes us more comfortable with our March call,” said Laura Rosner, a U.S. economist at BNP Paribas SA in New York and a former researcher at the New York Fed. “This is the progress we need to be seeing in order to be confident by March of next year. We'll need to see a couple more reports to make sure the strengthening in the labor market sticks.”

Fourteen of 32 economists surveyed yesterday said they expect the first reduction of bond purchases in March, while nine projected