Dec. 4 - Strong economic data amped up the focus on the Fed- and how soon it will pull back on its extreme support of the U.S. economy. Bobbi Rebell reports.
The Fed's tapering checklist is filling up, as the case for pulling back its support of the U.S. economy grows. Private hiring has surged. The trade deficit has narrowed. And new home sales had their biggest increase in nearly 33-1/2 years. That last point is key- it means rising mortgage rates haven't squashed the housing recovery. Housing worries were one reason the Fed didn't pull back on its support of the U.S. economy in September. But they will choose their timing carefully says Aneta Markowska, Chief U.S. Economist, Societe Generale: SOUNDBITE: ANETA MARKOWSKA, CHIEF U.S. ECONOMIST, SOCIETE GENERALE (ENGLISH) SAYING: "I think the market will be prepared by early next year. Right now the consensus is split between January and March, and I'm sort of in the same camp right now. I'm 40/60 between January and March, so still a little bit higher odds at the March meeting. January would be very much in play if they added a press conference to that meeting, which I think is very likely, so certainly by March the market will be absolutely be prepared, and the Fed will be able to do it without any adverse impact." While mortgage applications have fallen for the past five weeks- the drop has been in large part because of a sharp slide in refinancing- not because people weren't buying homes. And even though the ISM non-manufacturing index showed employment and business activity expanded at lower rates, the Fed's Beige Book said overall economic growth continued at a "modest to moderate" pace - despite a negative impact of the government shutdown. SOUNDBITE: ANETA MARKOWSKA, CHIEF U.S. ECONOMIST, SOCIETE GENERALE (ENGLISH) SAYING: "We are not surprised with the improving momentum because fundamentally we know that the economy has done a lot of deleveraging. Housing is a tailwind to growth. The fiscal headwinds have begun to fade at the margin. I think we are definitely past the inflection point in terms of fiscal drag on growth, and I think we are finally heading into sort of a period where everything is moving in the same direction." But the Fed can be fickle. And if one key report could solidify or derail the tapering timeline, it is the monthly jobs report, which comes out on Friday.