Rates Seen Staying Higher For Longer. Blame Canada?
In a surprising turn of events, this week's biggest market mover for interest rates was a policy announcement by the Bank of Canada (BOC). The event was credited for prompting a re-think of the US Federal Reserve's rate outlook.
Specifically, the BOC hiked rates despite about half the market believing it would hold steady. While the odds that the Fed holds steady at next Wednesday's announcement are quite a bit better, the argument this week was that central banks might err on the side of tough love as opposed trusting that inflation would subside.
If we look at year-over-year numbers, it seems clear that inflation is subsiding. The following chart shows both monthly and annual versions of the Consumer Price Index (CPI) at the "core" level (which excludes more volatile food an
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