The Globe and Mail reports in its Thursday, Dec. 20, edition that the United States Federal Reserve hiked its key rate by a quarter of a percentage point Wednesday and signalled a slower pace of rate hikes next year. The Globe's David Berman writes that the flat yield curve -- or the relatively minimal difference between the yields on short-term and longer-term bonds -- suggests a skeptical view of economic activity that some observers believe is consistent with a coming recession.
The S&P/TSX Composite Index is down 12 per cent this year, touching its lowest point since July, 2016.
Now that the Fed has signalled its direction on monetary policy, the Bank of Canada's own rate policy will be in economists' crosshairs, given the weaker state of the Canadian economy right now. Canada's rate of inflation fell to an 18-month low of 1.7 per cent in November, down from 2.4 per cent in October, with tumbling energy prices largely to blame, Statistics Canada said Wednesday. Capital Economics expects that inflation will likely move even lower early next year, to about 1 per cent.
Capital Economics economist Stephen Brown says, "We do not expect any further interest rate hikes from the Bank of Canada."
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