QE rollback seen in Sept if labour mkt improves: Deutsche

Federal Reserve chairman Ben Bernanke on Wednesday did not give a specific guideline for the tapering of quantitative easing.

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Peter Hooper, MD and chief economist, Deutsche Bank feels tapering of QE qill depend employment data. He believes if the US labour market holds up and there are gains in payroll then Fed is likely to begin tapering by this September. Below is the verbatim transcript of Peter Hooper's interview on CNBC-TV18 Q: How are you reading the Federal Open Market Committee (FOMC) comments that have come in? Are you still bracing for a September-October timeline for the tapering to begin? A: Yes, the Fed came with a little more dovish today. Certainly the revision to the GDP data saw weakness in the first half and a concern about inflation is as low as it is, but none of the changes were enough to suggest an operation of their current intention. To begin the tapering at their mid-September meeting has given us enough indication that as long as the labour market holds up and the numbers are looking okay, we will see tapering beginning in this September. Q: Do you think September is on and if not, what are the data points that the Fed is actually looking at? A: Most important is the labour market. If we continue to see payroll, employment gains in 175,000 to 200,000 range even 150,000, on a monthly average might be sufficient as long as they see inflation picking up a bit. So firstly, the labour market and secondly, where core inflation has been low, they noted that it will persist at this level and could cause economic damage and they are concerned about that. The most recent monthly numbers are beginning to see bottoming and inflation numbers should begin to look up and their expectation as well will improve. But at the bottom of both the labour market and inflation is where growth and economic activity, where GDP growth is headed. It was quite weak in the first half of the year particularly first quarter picked up some in second quarter on a revised basis. We think that as the fiscal drag begins to diminish that will pick up further in the second half of the year. That is the expectation and those are the factors that they will be looking at.