Weak jobs data may lead to a delay in tapering plan: IHS

Nariman Behravesh, Chief Economist, IHS spoke to CNBC-TV18 on the US economy and what to expect from the Federal Open Market Committee (FOMC), next week.

Also read: QE money in Asia heads out, but on a slow-moving train Below is the verbatim transcript of his interview on CNBC-TV18 Q: How you assess the strength in the US economy given the recent, slightly weak data that we have seen in terms of jobs? A: If we look at the Q3 data we think things are still a little bit weak. The economy is probably only growing about 1.5 percent. By the Q1 things could pick up to around 2.5 percent and by the early next year, we could be all the way up to 3 percent. The problem for the Fed is that there are still some indications of weakness out there - the employment report, which was very disappointing and the Fed has sort of hung its hat in terms of tapering on the employment statistics. I would say that the employment numbers that came out last week do not justify a tapering decision and will probably not result in a tapering decision next week. Q: There are two ways to look at this, from the point of view of the comments made by Fed Chief Ben Bernanke in May, comments that roiled the markets considerably - we can look at this already as the beginning of the great exit and that when a taper comes to be is simply semantics or technicalities that we are already seeing the Fed decide that it wants to start withdrawing this big flood of liquidity that it has pumped into the global markets or the other way to look at this is let us wait till they do start cutting back on asset purchases - what cues do you think the markets are taking and which one of these do you think is more believable? A: You are absolutely right. The markets have to some extent anticipated the Fed moves. We have seen fairly large increases in long bond yields - 100 bps or more, large increases in mortgage rates, the fact that housing is still growing but at a slower pace than before and I think that is one of the reasons we think the Fed might hold off a little bit. That plus uncertainty about what the full impact of this sequester is on the economy and also the geopolitical issues in terms of Syria and the effect that is having on oil prices. All of this we think sort of plays into this notion that they will probably hold their fire and wait a little bit longer.