TD / Canada Trust Weekly Economic Highlights – July 22


United States

  • In what was likely one of his last Congressional hearings as Fed Chairman, Mr. Bernanke emphasized that, despite continued progress, the situation in the labor market remains “far from satisfactory”. And, with inflation running below the Fed’s target, “a highly accommodative monetary policy will remain ap­propriate for the foreseeable future”.
  • The key word in Bernanke’s message is “gradual”. The economic recovery will most likely accelerate gradually, and likewise, adjustments in monetary policy are expected to take place at a measured pace.
  • Gradual should equate to “more predictable”, hence, less likely to cause volatility; another way in which the Fed aims to continue supporting the economy.


  • The Bank of Canada kept interest rates on hold on Wednesday during governor Stephen Poloz’s first interest rate announcement. Slight changes made to the forward guidance and to the forecasts contained in the latest Monetary Policy Report were construed as more dovish than previous iterations. Observers pointed to moves in currency and fixed-income markets on Wednesday as supporting evidence.
  • However, we view that interpretation as overdramatic. The moves in financial markets need to be viewed in the broader context of the rally we have seen in those markets since June.
  • Fundamentally, nothing has changed with the Bank’s forecast as the changes made were more cosmetic in nature. Both headline and core inflation are projected to reach the 2% target by mid-2015, identical to previous forecasts. As such, we remain committed to our view that the central bank will remain on the sidelines until the final quarter of 2014.


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