Bank of America’s Global Economist Aditya Bhave on Wednesday said the United States’ August job numbers are soft, which is why Fed is unlikely to make the taper announcement at the September meeting.
The US August CPI came in at 5.3 percent, a tad below street expectations.
“We focus more on the core print, which also came in below expectations. On month-on-month (MoM) basis it came in at 0.1 percent,” Bhave told CNBC-TV18 in an interview and noted that this gives the US Fed a little more room to push back the taper.
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“Our base case is that they signalled that they are still willing to start tapering this year in September and then they go ahead and announce and implement the taper in November assuming we get a much stronger jobs report in October. If that is around 500,000 or higher, then there is a pretty good chance that the Fed will go ahead and start tapering,” he explained.
He added that inflation is a softer number and if the Fed is thinking about the longer-term inflation trajectory, he thinks this figure changes its views that much.
Speaking about US growth, he said, growth rates are going to be strong immediately when reopening starts because that is when the base effect is the most favourable.
“I would look at where we are relative to potential growth, what is the output gap. What is happening right now in the US is that we are at or around the potential gross domestic product (GDP) in levels and yet despite delta, we continue to grow much faster than potential,” he said.
For the full interview, watch the accompanying video.