Central Banks


He adds:

  • Less monetary stimulus will be needed as forces fade
  • The vulnerability of too much debt is increasing
  • Right now things are fine, but vulnerability is increasing and since economy is close to where it belongs, interest rates are heading higher
  • economy can grow about potential, sweet spot of growth
  • convinced there remains untapped potential economy
  • sees some good pickup in wages and last 6 – 8 months, we are in a phase we call the sweet spot
  • hopes that the youth, women labor participation rate will rise
  • concerned about transition and household debt dynamics
  • What keeps him up at night is a cyber event
  • Neutral rate is between 2.5% and 3.5%, call it 3% as neutral
  • We don’t control the neutral rate. 
  • Forces in the economy suggest not time to be at a neutral rate
  • We don’t know how long it will take to return to the neutral rate

The overall tone today was more upbeat and suggestive that rates over time will be moving higher.  

Does it mean they will be moving sooner rather than later?…No.  You can argue the topic on “Household debt” required a more hawkish tone as a warning of what could happen if you leverage too much as your ability to service that debt will become more and more burdensome when/if rates do rise more toward neutrality.

The USDCAD moved back to the 100 hour MA at 1.28514 and traded above and below the level.   It did stall near a lower trend line but remained well above lower MAs and swing levels (See chart below).

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