(April 28 – 19:00ET) – Traders are now whispering that the U.S. Federal Reserve Board may raise rates 50 basis points at the next meeting in light of recent economic data. This week’s Employment Cost Index, which came in far higher than expected, seems to be behind much of the speculation.
On the other hand, some traders were mollified by this morning’s numbers showing that personal income was growing faster than spending in March. Similarly, Canadian worries were eased a little by today’s GDP data, which showed the economy actually shrank in February after 19 months of successive gains.
For now, CIBC World Markets remains convinced that rates are going up 75 bps over the next four months, although it expects the market to take its medicine in three easy swallows. Economists at RBC DS Global Markets are expecting 50 bps by the end of June, and note that the Bank of Canada should be expected to follow along in step.
-IE Staff