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Sutton Group-Heritage Realty Inc. Brokerage | |
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Real Estate News for Durham Region |
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Sunday, 16 May 2010, 08:25:04 PM |
Robert’s Financial Update
14 May 2010
Rates Specials
5 Yr Variable 1.95%
4 Yr Fixed 4.24%
General quote only
Please ask for a personalized rate quote
____________________
Visit website
www.findingyourhome.ca try community corner section!
____________________
Robert Kavanagh
416-414-6815
www.callrobert.ca <<
Highlights of
FINANCIAL MARKETS MONTHLY
Canada’s economy is continuing to improve
��February’s GDP report indicates that output continues to grow
��Canada’s economy builds momentum on April’s employment growth
��A 2.9% surge in motor vehicle sales boosts retails sales in February.
��Activity in housing markets is continuing to improve
��Improvement in the trade surplus in February suggests that net exports will contribute positively to overall GDP growth in the first quarter of 2010
��Headline inflation index was flat in March as traveler costs dive after the Olympics.
Canada’s economy hits its stride
Canada’s strengthening economy led the Bank of Canada to alter its policy stance in April by removing the conditional commitment, a first step in the gradual withdrawal of monetary policy support. The generally improving tone in the data supports the Bank’s stance that the need for extraordinary monetary policy support has passed. The Bank of Canada clearly signaled that it is poised to raise the overnight rate from its current 0.25%. While Governor Carney indicated that a rate hike in June “is not preordained,” our forecast for the economy to maintain its strong momentum in March and April will likely lead to a rate increase to 0.50% on the June fixed action date. This assumes that the debt crisis in Europe remains contained and that a resolution is reached in relatively short order. Given the strength of Canada’s economic recovery, we still expect that the Bank will implement a policy of steady, gradual rate increases resulting in a 3.5% rate at year-end 2011.
Shifting drivers of inflation – Canada versus the U.S.
��Recent Canadian core inflation numbers have been coming in stronger than expected, prompting increased scrutiny of the inflation outlook.
��Expectations for a lower rate of inflation were largely based on the assumption that significant slack built up through the recession, as measured by the output gap, would exert continued downward pressure on inflation.
��In contrast, U.S. core inflation numbers have surprised on the downside.
��This paper examines how the relative roles of the output gap and inflation expectations in determining the rate of inflation may have changed over time in Canada and the U.S.
��Our analysis suggests that the output gap has had much less influence over the rate of core CPI inflation in Canada, with inflation expectations playing a relatively more important role, since inflation targeting was adopted as an official policy of the Bank of Canada.
��Results for the U.S. suggest that the output gap remains a significant factor in determining the rate of inflation; however its role has diminished since the 1980s with expectations increasing in importance.
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