Tightening financial conditions are hurting the Canadian economy to the point where the rising risk of a recession and a housing contraction much larger than anticipated cannot be discounted. Although we expect the Bank of Canada to raise its policy rate to a peak of 4.75% early next year, after ... READ MORE >
Inflation
Retail sales fall more than expected as spending and inflation cool
Retail sales in November posted the sharpest decline of the year, falling by 0.6% as shoppers pulled back from holiday spending, the Commerce Department reported on Wednesday. Early shopping in October and falling prices were important factors that contributed to the pullback, which exceeded analysts' ... READ MORE >
FOMC decision: Fed lifts policy rate to range of 4.25% to 4.5%
The Federal Reserve on Wednesday laid the groundwork for an eventual pause in interest rate increases early next year, even as it indicated it intends to continue lifting rates into a slowdown. The projection of a slowdown, which is in the Summary of Economic Projections released after the Federal ... READ MORE >
November CPI: Easing inflation amid surging housing costs poses dilemma for Fed
On first sight, the U.S. November consumer price index would suggest relief among policymakers following the second straight inflation report that came in lower than expected. With the top-line figure easing to a 7.1% annual increase and core inflation falling to 6% on a year-ago basis, the data ... READ MORE >
Did fiscal spending go too far? Assessing the global economy.
Fiscal responses by governments around the world during the pandemic were unprecedented. Many governments put forward anywhere between 20% and 30% of gross domestic product in spending to mitigate the impact of economic shutdowns. Now, after months of elevated inflation and surging interest rates, ... READ MORE >
FOMC preview: Policy rate to increase by 50 basis points
Two weeks after Federal Reserve Chairman Jerome Powell pointed to slower interest rate increases, the central bank is poised to do just that when the Federal Open Market Committee meets this week and raises its policy rate by 50 basis points. Such an increase would follow a series of 75 basis-point ... READ MORE >
Producer price inflation hotter than expected ahead of Fed’s meeting
Wholesale prices grew faster than expected in November, driven mostly by services which have become the new focus of the Federal Reserve in its fight against inflation. The producer price index for final demand rose by 0.3% in November and by 7.4% year-over-year, the Bureau of Labor Statistics reported ... READ MORE >
Jobless claims show an uptick in layoffs
New filings for jobless claims inched up by 1.8% last week to 230,000, remaining above the pre-pandemic level for the fifth week in a row. There is no doubt that the labor market has been slowing down as more companies reassess their hiring plans. It has also become clear that the bottom in initial ... READ MORE >
Bank of Canada increases policy rate to 4.25%
The Bank of Canada raised its policy rate by 50 basis points to 4.25% on Wednesday, the seventh consecutive increase since March. In our estimation, the Bank of Canada is nearing the end of a rate hike cycle that we expect will peak at 4.75%. The Federal Reserve, by contrast, will almost certainly ... READ MORE >
U.S. service sector grows, adding pressure on Fed
The Institute for Supply Management's service index rose in November as business activities increased on the month. The unexpectedly strong purchasing managers survey data, released on Monday, added more pressure on the Federal Reserve as focuses on taming inflation, especially in services. The ... READ MORE >