TD/ Canada Trust Economic Highlights – March 20


United States
• The Fed carried out its well-telegraphed rate hike this week. Despite the Fed’s hawkish messaging in
advance of the decision, its expectations for rate increases were unchanged, leading bond yields to dip.
• The Fed edged up its economic forecast for 2018, as did TD Economics in our latest forecast, released
this week.
• Overseas, one populist threat to the Eurozone was vanquished this week as the populist right-wing party
lost the Dutch election. However, the UK is days away from triggering the two-year Brexit negotiation
process with the EU, so the risk of euro-driven market volatility remains.

• Economic growth in Canada continues to surpass expectations. With recent data on manufacturing sales,
growth in the first quarter appears likely to surpass our recent forecast of 2.6% (annualized). This would
mark the third straight quarter that growth came in above 2.5%.
• The Canadian housing market is the gift that keeps on giving. The further prices and sales appear to
move from fundamentals, the bigger the risk of a correction. The downside risk is greatest in the Greater
Toronto Area where prices are up 24% year-on-year.
• To deal with housing, the Bank of Canada prefers macro-prudential tools to the blunt instrument of interest
rate policy. With scant inflation, the central bank is likely to remain on hold through 2018. While further
upside surprises to growth could pull rate hikes forward, a sharper turn negative in housing could just as
easily push rate hikes even further into the future.

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