Sunday, July 15, 2007

Canadian and International Monetary comments on interest rates and inflation


Canadian and International Monetary comments on interest rates and inflation

• The risk that inflation will remain in the upper end of the Bank of Canada’s target band will put policymakers back into rate hike mode in July.

Bank of Canada
• We expect the Bank to boost the policy rate to 5.25% to ensure that growth slows enough to curtail upward inflation pressures.
• Although core inflation has moderated, strong wage growth along with elevated input prices will keep the Fed on the sidelines this year.

Federal Reserve
•A stronger U.S. economy and persistent upward inflation pressures will likely see the Fed hike rates early next year.
1 • Once inflation moves back above zero, the Bank of Japan is likely to start hiking rates again.

Bank of Japan
• Policymakers will deliberately keep the pace of rate increases slow in order to ensure that the economy remains on a firm path

European Central Bank
1 • The ECB is expected to continue to raise rates as inflation risks are skewed to the upside and monetary policy remains stimulative.

Central bank watch
• We expect that policymakers will raise the policy rate to 5% by mid- 2008 to nip upward inflationary pressures in the bud.

• The Bank of England has adopted a more aggressive tone and we now expect a 25 basis-point rate hike in July with another boost likely in November.

Bank of England
• Inflation is expected to settle at 2% in 2008 with the policy rate holding at 6%.

Inflation
Canadian real rates still historically low
The robust growth in Canada’s labour force is ... while productivity growth is expected likely to slow given record-high participation to ramp up after four years of strong inrates and demographic factors...

© Royal Bank of Canada. The material contained in Financial Markets
Monthly is the property of Courtesy of RBC Financial Group

more about rates and inflation


Toronto Real Estate Board (TREB) Average Prices and Graph

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