Highlights of the Week – July 17
• Fedspeak took center stage this week. Fed Chair Yellen delivered prepared remarks to Congress, where among
other things, she acknowledged the uncertainty as to when inflation would rise back toward its target.
• Taken together with Governor Brainard’s comments, markets interpreted the tone as dovish, with long-term Treasury
yields and U.S. dollar falling, while U.S. equities soared toward all-time highs.
• Both the CPI and retail sales reports came in below consensus, adding further downside risk to the pace of Fed
hikes over the next year and a half.
• The Canadian dollar gained more than a cent vis-à-vis its U.S. counterpart since mid-week as the Bank of Canada
hiked interest rates for the first time since 2010 and indicated that more increases are likely in store.
• Hawkish statements and a solid economic outlook both suggest that another policy rate increase is coming soon –
most likely in October. A more gradual pace of hikes is expected thereafter.
• Governor Poloz noted that the path forward will be ‘data dependent’, but with inflation forecast to remain soft
through the remainder of this year, the pace of future hikes will likely hinge on the continued rotation of economic
growth. Non-commodity investment and exports are the indicators to watch most closely.
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Adam Mills, Broker of Record
Royal LePage Team Realty Adam Mills, Brokerage