While we wait for more specifics on future US economic policy (currently long on promise, short on detail) we move our focus back to the global economy and central bank policy:
The Bank of Canada (BOC) announced the results of its winter Business Outlook Survey earlier this week which suggests improving over-all business prospects, reflecting a "building domestic demand, a supportive export outlook and an expected recovery in energy-related activity". More importantly, perhaps, inflation expectations are "ticking up".
This will certainly get the Bank of Canada's attention and although total CPI and some of the other measures are still below target, increases in inflation will be their primary focus. The BOC will announce their next policy decision next Wednesday (Jan. 18) and while we do not expect any changes to interest rates, recent gains in employment are encouraging (although the stronger C$ is going to be a concern). Canadian CPI data is due to be announced next Friday.
The European Central Bank will announce their latest interest rate and monetary policy decisions on the same day (a little earlier) and while inflation and economic activity have been picking up, there will likely be no change in interest rates, but financial markets will be watching for any changes in their bond buying program.
The US Federal Reserve will announce its latest decision on Feb. 1. Consumer sentiment is improving and there is hope in the business community (which may lead to a better investment climate) and while inflation pressures (in commodity prices and also wage data) are growing and unemployment is close to full capacity, it is expected that they will not yet be raising interest rates.
The UK continues to be preoccupied with Brexit, the pound has been flirting with its post-Brexit lows:
And while this has actually assisted the British economy recently, consumers are not confident (because of Brexit) and will be a drag on the economy going forward. The Bank of England will announce its next interest rate decision on February 2.
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Scott Tomenson,CIM Managing Partner, Chief Investment Strategist