(September 3 – 12:15 ET) – The interest rate hawks are circling over the interest rate forecasters. At CIBC World Markets, economist Avery Shenfeld is calling for two more rate hikes from the U.S. Federal Reserve Board before spring.
Shenfeld says he expects one more 25 basis point rate hike before the year is out, and another 25 bps “over the winter”. That should pressure the Canadian dollar enough to get the Bank of Canada to finally join the Fed too, he suggests.
The economy and buoyant stock markets will push the Fed to raise Shenfeld believes. Apart from today’s surprisingly light jobs report, a continued strong U.S. economy is expected to keep the pressure on the labour market through the third quarter – up more than 4%.
With the loonie taking a beating despite the improved commodity picture, the Bank of canadawould surely have to follow any future Fed moves upward, Shenfield predicts. Canadian treasury yields should follow U.S. yields up too, he says, although CIBC doesn’t see the U.S. long bond running much past 6.5% with inflation kept below 2.5%.
-IE Staff
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