Though the Bank of Canada and the European Central Bank have enacted cuts, the story looks different in the United States, where the economy continues to outperform expectations and where inflation remains stubbornly above the U.S. Federal Reserve’s target.After raising interest rates in tandem through much of 2022 and 2023, central banks around the world are starting to shift into reverse and ease monetary policy. However, markets expect a gap to open up between the more hawkish U.S.
“Central banks have really been very reactionary for the last couple of years,” he said. “But now we’re getting back towards a more normal range … they’re starting to look more into the future, less at the past.” The story looks different in the United States, where the economy continues to outperform expectations and where inflation, as a result, remains stubbornly above the
“But that’s not the case anymore because all the different countries are dealing with their own domestic issues, own domestic inflation trends. And if everyone waited for the Fed, it would probably have been a mistake at this point.” The divergence between the Bank of Canada and the Fed has become a become a hot topic on Bay Street, where economists are debating how far apart the two countries’ monetary policy can get before it becomes a problem. Theoretically, a weaker Canadian dollar could add to inflation by pushing up the price of imports.
Source: Financial Digest (financialdigest.net)
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