Highlights
- Since we see financial market stress as having declined substantially and expect employment growth to resume before year end, we expect the move toward a 2% fed fund rate in 2010 to be front-loaded, starting as early as the first quarter.
- As the economy continues to pick up, the debate over the pace at which monetary accommodation will be removed can only become more heated. Although there is disagreement on the matter, nevertheless a flattening of the Canadian yield curve is on the screens of most investors.
Beige book: A still-weak labour market
The economic news has been encouraging in recent weeks. In the U.S. in August, housing units were started at an annual rate of 598,000, up 24.8% from four months ago, and retail sales jumped 2.7%. The cash-for-clunkers program was of course a major boost, but even core retail sales (excluding autos, gas stations and building materials) rose 0.7%. The ISM manufacturing survey came in at 52.9, finally breaking 50. Industrial production was reported up 0.8% in August, and July production was revised up to a 0.5% gain. The recovery that began this summer seems to be on a good footing.
