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Why Rate Hikes May be a Hike Away

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With both North American Central Banks sticking to their accommodating low interest rates are market participants missing key dashboard signals in their belief that rate increases will be upon us sooner than later. Its true that the long trusted and traditional data point are generally pointing to rising inflation[1] but it seems that unemployment, which is still rising, reigns king in interest rate decisions. Perhaps the unprecedented disruption in 2008 requires us to consider different data points in our expectation assessment. Or perhaps it is as simple as how difficult it would be to defend a decision to raise interest rates while unemployment is still rising.  More on this in a bit…….

[1] Inflation in Canada is tracked by Statistics Canada through the consumer price index (CPI) which is a basket of about 600 goods and services. Prices are checked every monthly and are weighted by their importance in the total budget (so a 10 per cent increase in a durable good would have a bigger impact on the CPI than a 10% increase in a food item).

hold that thought and we’ll be back later with a swack of data on this……….


Written by thehallmarketreport - Head on a Swivel

January 15, 2010 at 8:49 am

Posted in Holy Macro