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Email this5:49 pm
December 16, 2020
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"How high will the funds rate ultimately need to go?" said Jan Hatzius, chief economist Goldman Sachs (NYSE:GS). "Our answer is high enough to generate a tightening in financial conditions that imposes a drag on activity sufficient to maintain a solidly below-potential growth trajectory."
He expects the Fed to hike by 75 basis points on Wednesday, followed by two half-point moves in November and December.
Also important will be Fed members "dot plot" forecasts for rates which are likely to be hawkish, putting the funds rate at 4-4.25% by the end of this year, and even higher next year."
https://www.investing.com/news/economy/asian-stocks-brace-for-salvo-of-central-bank-hikes-2894434
High rates suggest inflation may not settle down for a while. After these pullbacks in commodities, I am cautiously getting long again on selective commodity producer weakness.
As others have stated, we will need even higher interest rates in Canada to complete and inflation may be with us longer than expected. Being too heavily reliant on what seems like an oasis in the desert (GIC's), may mean capital depreciation, unless one adds some exposure to inflation fighting investments.
6:26 pm
September 14, 2022
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I predict Fed goes 1%
At home the Gic dam is going to break
3:32 am
March 30, 2017
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I also say Fed will go 1%, anything less will be inconsistent with their messaging.
The dot plot has only been in place about 10 years which did not have the massive inflation that we see now. Not sure how reliable it will be to predict the future .
Dont see why Canada rates "need' to be higher than US....
I still predict GIC rates will be sticky. And I have yet to be proven wrong 🙂
6:04 am
September 14, 2022
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Wouldn't it be more equitable for the federal government to legislate real estate, for example, limit foreign buying more greatly than to rely on Bank of Canada? If they don't rates have to rise much more to shake out anyone who owns a third or fourth home.
8:17 am
December 16, 2020
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savemoresaveoften said
Dont see why Canada rates "need' to be higher than US....
I still predict GIC rates will be sticky. And I have yet to be proven wrong 🙂
The *guess is Canada might need to go higher rates to keep flight of capital in check ...
- - -
Hubert upping their game today by raising HISA to 2.85% and 1 year to 4.4%, 5 year remains at 5%.
8:37 am
February 7, 2019
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ExtraSauce said
The *guess is Canada might need to go higher rates to keep flight of capital in check .
They also use interest rate to "manage the $Cdn/US exchange rate at a reasonable level so as to maintain a reasonable balance of import costs and export revenues ...
| CGO |
1:39 pm
March 30, 2017
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There is no such thing as "flight of capital" concern in BoC's mind. Canada is a resource rich country, not a 3rd world country that needs to "defend" its currency.
As cgouimet mentioned, a relative "weak" Canadian dollar is in the best interest of the Canadian economy, which the BoC keeps in mind when it comes to setting interest rate. Even then the BoC rarely use interest rate to try to "manipulate" the exchange rate level. The last time they actively did it was during the Quebec referendum, and man was that a long time ago.
2:15 pm
December 12, 2021
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savemoresaveoften said
"weak" Canadian dollar is in the best interest of the Canadian economy,
INFLATION, INFLATION and INFLATION.
Your statement above is outdated obsolete in 2022.
There is a Global Currency war right now, central bankers are vying to boost domestic buying power at the expense of exporters. in fact just 6 weeks ago the Bank of Canada’s Tiff Macklem bemoaned the decline of the Canadian dollar. Swiss National Bank President Thomas Jordan suggested he’d like to see a stronger franc.
simple week currency = inflation
6:18 pm
October 27, 2013
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I agree the BoC is not particularly happy with the loonie at 75 cents (give or take) because it is inflationary. BoC will have to juggle interest rates high enough to fight inflation of both kinds (goods and services plus currency) but to try and avoid a potentially deep recession. There is no way to get it perfectly right except by good fortune and impossible luck.
6:20 pm
March 30, 2017
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agit said
savemoresaveoften said
"weak" Canadian dollar is in the best interest of the Canadian economy,INFLATION, INFLATION and INFLATION.
Your statement above is outdated obsolete in 2022.
There is a Global Currency war right now, central bankers are vying to boost domestic buying power at the expense of exporters. in fact just 6 weeks ago the Bank of Canada’s Tiff Macklem bemoaned the decline of the Canadian dollar. Swiss National Bank President Thomas Jordan suggested he’d like to see a stronger franc.
simple week currency = inflation
I suggest you read up on interest rate parity…..
6:54 pm
December 12, 2021
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AltaRed said
but to try and avoid a potentially deep recession. There is no way to get it perfectly right except by good fortune and impossible luck.
We are at the point now that the only way out is a recession to cool down inflation.
The inflation is "out of control" inflation is becoming more entrenched in the economy, Oxford Economics foresee aggressive rate hikes leading to a recession. There is about two jobs for every unemployed person. Ford just warns investors of an extra $1 billion in costs during the third quarter
9:42 pm
October 27, 2013
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You missed my specific wording about a potentially 'deep' recession. A recession was almost certainly in the cards for some time now. It is a matter of depth. Two quarters or four? or six? Equity markets and bond markets with additional double digit 15-20% losses? Or simply high single digits?
The point is how well BoC can walk the line between a vanilla recession that is a mere blip on a trend line, or not. We will only know in hindsight.
4:33 am
December 12, 2015
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What do you all think of how the rates are quite flat, even some inverted, right now? Does this have predictive value as to rates now peaking and set to drop?
12:27 pm
April 14, 2021
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Saver-Mom said Does this have predictive value as to rates now peaking and set to drop?
To me, it gives insight into how the banks are thinking and that they believe a recession to hit within a year. Their current rates will entice depositors to lock in for 18 months, at which time, the bottom will drop out and they can slash rates; just in time for renewal at 0.5% - 1% rates.
12:43 pm
October 27, 2013
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It is also about what investors in the bond market think. The bond yield curve is even more inverted in the belief inflation will come down sooner rather than later. Bank deposit rates compete with the bond market in some ways so near term rates have to be higher than longer term rates. IOW, the banks are not the key drivers.
2:57 pm
October 21, 2013
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As I hear it, there is an expectation of recession and consequent rate drop.
I am certainly no expert but this appears to be the prevailing view - more or less, sooner or later.
What I am wondering is whether there is a necessary connection between the two.
If there is a recession, GDP declines, jobs decline, inflation declines, as I understand it. (( could be wrong.) But what if the factors that helped create inflation continue? - shortages related to Putin war, aging retiring work force, new pressures due to climate change destruction of homes and habitats creating more shortages, etc.? It seems to me these could keep prices and rates high.
Don't quote me! - but don't just give me theories either, please.
3:41 pm
February 7, 2019
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Loonie said
As I hear it, there is an expectation of recession and consequent rate drop.
I am certainly no expert but this appears to be the prevailing view - more or less, sooner or later.What I am wondering is whether there is a necessary connection between the two.
If there is a recession, GDP declines, jobs decline, inflation declines, as I understand it. (( could be wrong.) But what if the factors that helped create inflation continue? - shortages related to Putin war, aging retiring work force, new pressures due to climate change destruction of homes and habitats creating more shortages, etc.? It seems to me these could keep prices and rates high.
Don't quote me! - but don't just give me theories either, please.
I agree. Many people want to hang one person or one thing or one political group/party for the inflation we are living with.
As you point out it's more complicated than one single thing or person at the root of it all. It is a violent storm of many simultaneous factors.
| CGO |
3:56 pm
April 27, 2017
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We are going through a major change. People went from buying services to goods during the pandemic, now back to services. Thats causing prices to jump as all these adjustments and relocations cost money. That’s a one-off event though.
The other change is that a decade of next to zero investments in commodities is coming to bite us with Putin exacerbating the problem. This is transitory but takes a long time to address. Like building processing capacity, removing ideological constraints and educating oil and gas engineers.
And then there are changes in money supply policy which came late and are working to counteract the inflation but might be hampered by wage demands and strikes if inflation expectations become ingrained.
I’d say future inflation and hence rates are even more unpredictable than usually.
6:39 pm
September 11, 2013
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One factor I keep my eye on is China, we get a ton of stuff from there. I believe they are using their "zero covid" policy as a trade weapon, the flow of goods continues to be restricted with no end in sight even with the waning of the pandemic, to restrict the operation of their ports to cause havoc in the economies of the West while still exporting just enough to keep domestic peace.
Canada, due to its poor standing in Economic Complexity Index, will suffer more than other 1st world countries, we make virtually nothing here. Right now I'm not buying that inflation's transitory here.
7:28 pm
December 12, 2021
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Chairman Jay Powell press conference
“We still have some ways to go and incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected,”
“It’s very premature in my view to be thinking about or talking about pausing our rate hike. We have a ways to go.”
and
Euro zone inflation hits record high of 10.7%
Italy’s inflation above 12%
Germany inflation jumped to 11.6%
Please write your comments in the forum.