James Dutkiewicz, CFA, Senior Vice-President, and Head of Fixed Income – CI Global Asset Management
The battle between slowing overall economic activity and stubborn inflation continues to rage in most geographies. Central banks in these regions have increased short rates very sharply over the past year. Generally, the results have been positive as headline inflation has fallen and interest rate sensitive sectors of the economy are in decline. However, the resilience of the economy as a whole has led policymakers to remain active and vigilant.
Specifically, in Canada, the increase in job creation remains too strong for a meaningful pullback in wage growth. The upward trend in household income has thwarted the Bank of Canada’s efforts to create a sustained downward tilt to core inflation. The Bank has taken overnight rates to 4.5% and has indicated a preference for pausing to assess the lagged impacts of its tightening cycle. The over-levered household sector weighs on the mind of policymakers and is the primary rationale for the difference in rates between Canada and the U.S.
Read the rest of James’ commentary by downloading: 2023 March Portfolio Construction
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