(January 24 – 10:40 ET) – The U.S. Federal Reserve decision to drop its regular bias announcements is not merely a cosmetic move, says RBC Dominon Securities analysts.

It may make the Fed more willing to highlight inflationary risks, says DS. This may push markets to read the Fed as more hawkish than ever. DS expects 75 basis points in rate hikes during the first half of 2000.

Although inflation still hasn’t emerged, DS says that the Fed is focusing 12 to 18 months down the road. There are enough signals of future inflation to justify rate rises. It expects the Bank of Canada to match the Fed, even though inflation is nowhere to be seen here either.

Economists at CIBC World Markets are anticipating a tightening too. Fed chair Alan Greenspan is speaking before the Senate Banking committee today and may confirm that. suspicion.

Bank of Canada Governor Gordon Thiessen is speaking for the first time in months, in Halifax this week. The speech that will be closely watched up here.

CIBC expects this week’s economic data releases to show low inflation, but lots of pressure. DS believes that a 50 bps tightening is already priced in, implying that the market has another 25 bps to absorb. Bonds are expected to be sluggish as the market begins to fear the Fed move the week after.
-IE Staff