(October 25 09:15 ET) – Interest rate hikes are on the menu in the U.S., Canada and Europe, according to economists at RBC Dominion Securities Inc.
RBCDS expects to see U.S. inflation trends to be confirmed in the week’s economic reports. It’s predicting the U.S. Federal Reserve Board to tighten another 25 basis points in November as a result.
Thursday’s employment cost index will be the focus of inflation watchers this week. The last ECI report showed a sharp increase: 1.1% for the second quarter, on an annual 0.8% average trend. CIBC World Markets is calling for a 0.9% this quarter, warning that anything greater will be a bearish signal for bonds and stocks.
The only other major report is GDP at factor cost. Although this is not expected to be as important to the market as signs of wage inflation.
The Bank of Canada is likely to follow the Fed and raise rates in November, says RBCDS. CIBC agrees, noting that the bond market has probably already priced in a 25 bps rise.
If rate hikes here and in the U.S. weren’t enough, DS is also expecting a 25 bps tightening move in Europe too on November 4. It says that growth in Eurozone M3 money supply -expected to be announced at some pointthis week – is likely to trigger the hike.
-IE Staff
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