February 27, 2015
HIGHLIGHTS OF THE WEEK
- The economic calendar was full this week with testimony from Fed Chair Janet Yellen and data on consumer price inflation and real GDP.
- Yellen’s testimony emphasized the improvement in the labor market, but also the importance of the outlook for inflation in guiding the path of interest rates.
- It’s impossible to argue with the strength in the job market – over 1 million jobs have been created in the last three months alone. However, on the inflation side of the Fed’s mandate there is ample room for caution. Headline CPI inflation fell into negative territory in January as a result of falling energy prices. This will fall out of inflation over the next year, but the strong dollar will keep a lid on broad price pressures.
- Remarks made by the Bank of Canada Governor this week led TD Economics to change its view on the future path of monetary policy. We no longer expect the Bank of Canada to cut rates at next week’s meeting.
- Overall, the economic data has held up pretty well so far, hardly justifying the call for a rate cut. The Bank of Canada’s core measure of inflation topped 2% for a sixth consecutive month in January. Next week’s release of real GDP is expected to show a gain of 2.2% annualized in the fourth quarter.
- Looking ahead, economic momentum will likely fade – but the balance of rising household imbalances and subdued but positive economic growth is likely to encourage the Bank of Canada to keep interest rates where they are for now.
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) 767-5442