Posts Tagged ‘Overnight Rates’

Economic Trends and Outlooks

Tuesday, May 6th, 2008

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Remarkably in this environment , core inflation has remained quite muted. Nevertheless the Bank of Canada , resumed its expected tightening moves in the last years. Overnight rates may be hiked more than once in the next coming months.

Labour markets are tight and tight to the point that labor shortages may become evident in many sectors – especially in the booming Alberta and British Columbia economies. Wage inflation may well follow suit with surging energy and petroleum commodity prices and pricing.

Economic data continues to be strong. This is largely reflective of the recent trend and trend lines in energy as well as metal and raw material commodity prices. This has narrowed investment income deficits , which when coupled with continual strong trade surpluses especially in regards to oil – bode for a very strong underpinning of the Canadian dollar currency and currencies. In addition bond yields will continue to be strong despite the continued rise in short term interest rates. Long term interest rates will continue to be quite muted and demand for long term duration fixed income products by pensions and coming pensioners will remain more than strong in the financial and financial markets. Even the mildly inverted yield curve ( tow year bonds yields exceed 10 year bond yields by around 6 basis points) an outlook of solid growth and solid profits , low domestic inflation, rising incomes and strong trade balances appear to be in the offing.

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