TD/Canada Trust Economic Highlights – Jan 21


United States

  • In the aftermath of last Friday’s disappointing payroll numbers, this week the market searched for signs of a slowdown elsewhere in the economy. Fortunately, there were none to be found. Economic indicators out this week, such as retail sales and housing starts, continued to suggest that economic growth in the final quarter of 2013 will likely exceed our expectations.
  • Progress also continues to be made on Capitol Hill. This week, Congress swiftly passed the $1.012T FY 2014 budget, which sets discretionary program spending until fiscal year-end on September 30.
  • Meanwhile, the CPI report re-affirmed the lack of underlying inflationary pressures. The benign inflation­ary backdrop will allow the Fed to keep rates lower for longer, even if the unemployment rate falls below 6.5%. This, in turn, should help keep market expectations for future rate hikes in-check.


  • In light of last week’s disappointing employment report, many more people are now wondering whether Bank of Canada Governor Poloz will cut interest rates next week. The dovish speculation has been growing in intensity in markets and the Canadian dollar reached a four-year low versus the greenback this week, sitting just above US$0.91.
  • The possibility of a rate cut is not out of the question, but it is certainly not the odds-on favourite outcome. Most analysts, including ourselves, believe that the Bank of Canada will leave its overnight rate unchanged at 1.00%.
  • Few tweaks are expected to the communiqué’s forward-looking language. That said, a dovish interpreta­tion by markets will limit the scope for near-term improvement in the loonie.


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