First Take: Fed may not need its escape hatch

The minutes of the Federal Reserve's December meeting make clear that the central bank wants to leave itself room to reverse its decision to begin tightening money, however slightly, if the economy wobbles.

But the minutes also indicate central bankers' confidence in the economy's direction. Along with recent economic data, the pace of the Fed's bond purchases -- reduced to $75 billion starting this month -- appears to be headed steadily downward.

Text : Minutes of Fed's Dec. 17-18 meeting

Fed minutes: Vigorous debate on tapering

Only one member of the Federal Open Markets Committee, Boston Fed president Eric Rosengren, voted to wait before trimming purchases by $10 billion a month. The minutes show Fed governors and staff endorsing a strengthening outlook — calling growth "moderate" rather than "modest to moderate,'' for example. Fed officials have emphasized that they think the risks of modest tapering coming slightly too soon are fairly small.

The Fed won't have to use that escape hatch if economic data since the Dec. 17-18 meeting are a barometer of what's ahead this year. The latest evidence was Wednesday's estimate by payroll-processor ADP that private companies added 238,000 workers in December — led by the biggest pickup in construction employment since 2006. But it's far from the only evidence.

A report from investment bank Barclay's paints a clear picture of how expectations of growth for last year's fourth quarter have been rising since the Fed acted. It stands to reason that hopes for 2014 have been rising in tandem.

As the Fed met, Barclays expected gross domestic product to rise at a 2.2% annual rate in late 2013, It's now at 3.3%. On Dec. 18, better-than-forecast news on housing starts pushed Barclays' estimate to 2.3%. On Dec. 23, personal-spending data prodded the estimate to 2.6%.

On Christmas Eve, you may have ignored a durable-goods report for November that pushed the forecast to 2.8%. A good construction spending report on Jan. 2! pushed its estimate to 2.9%, and a soft November vehicle-sales report caused a pullback to 2.8% last Friday.

All of that came before a report on the November trade deficit on Monday, saying rising manufacturing exports and lower-than-expected spending on oil imports produced the highest exports ever. That pushed Barclays fourth-quarter growth forecast to 3.3%.

If that is all true, the ADP employment number becomes both a lot more believable and a lot more sustainable. And it becomes more likely that the Fed will stick to the course of slow tapering it has laid out.