Analysts at global financial firm Morgan Stanley expect the US Federal Reserve to start tapering its bond-buying programme, which has pushed the US 10-year Treasury yields to their longest rising run in six months, by the end of 2021.
"They (US Fed) have arrived on their inflation goal. It is not the worry it is the labour market, that is where they are focused" said Ellen Zentner, chief US economist at Morgan Stanley in an interview with CNBC.
"We have started to see a pick up in labour supply. September and October are critical in this regard as the benefits are running out. Schools are reopening, people are back to work....so you have got a bump in labour supply that coming that is going to keep the job numbers heightened," she said.
According to Zentner, this will help recover half the jobs by December-end that were lost in the wake of COVID. And as a result of their progress with the labour market, the US Fed may soon embark on its tapering journey.
Data on Monday showed that US job openings shot up to a fresh record high in June and hiring also increased.
That followed Friday's non-farm payroll report showing jobs increased by a larger-than-expected 943,000 in July.
Zentner expects the tapering to begin with the Federal Open Market Committee meeting in December 2021. Till then, she sees the central bank taking baby steps towards it so that it does not come as a surprise to the market.