TD/ Canada Trust Economic Highlights – December 20


United States
• Despite delivering a widely anticipated quarter-point rate hike this week, the Fed’s more hawkish outlook
for the pace of future rate hikes saw Treasury yields jolt higher.
• In our updated forecast we refrain from jumping on the fiscal stimulus bandwagon, given that significant
policy shifts remain speculative at this point.
• In the meantime, higher bond yields will filter through to higher borrowing rates for consumers and businesses,
and will ultimately diminish the need for Fed hikes. As such, our expectation for a very modest
pace of Fed hikes remained unchanged in our forecast.

• The focus in Canada this week was on household finances. Household debt reached another record high
in the third quarter. At the same time, debt servicing costs ticked down, but recent interest rate developments
are likely to reverse this move.
• Debt was also the focus in the Bank of Canada’s Financial System Review. Risks remain focused around
high debt levels and imbalances in housing markets. Rising borrowing costs, if not driven by improving
economic fundamentals, are a key trigger to turn risks into reality.
• TD Economics’ latest forecast sees Canadian growth improving to 1.8% next year, helped by the ‘bottoming
out’ of business investment and the lagged impacts of federal fiscal stimulus.

For further information, please contact:

John Maveety Manager, Residential Mortgages – Greater Ottawa Area TD Canada Trust
T: (613) 371-1984 F: (888) 899-1984 P: (866) 767-5446