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US: The Fed still binded to a zero interest−rate policy
Thu, Nov 5 2009, 09:24 GMT
by Economic and Strategy Team
Despite the improving economic backdrop, the U.S. central bank reiterated its commitment to keep rates exceptionally low for an extended period of time. More specifically, the FOMC emphasized the low rates of resource utilization (read unemployment rate) and subdued inflation trends (both current and expected) as the conditions that warrant keeping unchanged the current policy stance. It is worth noting that the press release continued to allude to the close link between business investment and hiring. We could not agree more with this view. This relationship is central to our scenario calling for a sustainable economic recovery. As today’s Hot Chart shows, business spending actually showed initial signs of firming with spending on equipment & software rising in Q3 (+1.1%), the first increase since the onset of the recession. This is a positive development that heralds an improvement in labour market conditions. But until the FOMC actually sees job creation, its dual mandate binds it to a zerointerest rate policy.
Published on Thu, Nov 5 2009, 09:25 GMT
National Bank of Canada
| 1100 University, 11th floor Montreal (Québec) H3B 2G7
http://www.nbc.ca/ | info@nbc.ca
Legal disclaimer and risk disclosure
This presentation may contain certain forward-looking statements about the 2009 Economic and Financial Outlook. Such statements are subject to risk and uncertainties. Actual results may differ materially due to a variety of factors, including legislative or regulatory developments, competition, technological change and economic conditions in Canada, North America or internationally. These and other factors should be considered carefully and readers should not rely unduly on National Bank of Canada’s forward-looking statements. This presentation may not be reproduced in whole or in part, or further distributed or published or referred to in any manner whatsoever, nor may the information, opinions or conclusions contained in it be referred to without in each case the prior express consent of National Bank.Related reports
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