We’re about to experience turbulence… please fasten your seatbelts!
The Fed’s eagerly awaited key rate decision at 2 p.m. today could definitely cause a fair bit of stirring on financial markets. As of this morning, the likelihood of a rate increase stands at only 34%. Were the Fed to decide to increase its rate, it would not be due to inflationary pressures, as U.S. inflation numbers released yesterday were all very close to expectations. Core inflation, excluding food and energy costs, remains under control at 1.8%.
Yesterday, highly favourable Canadian Manufacturing Sales data were also released. Strong sales in July (1.7% vs. 1.1%), coupled with the upgraded data for the previous month (1.5% vs. 1.2%) bode well for the third quarter and confirm that the recent economic doldrums were only temporary. This data also reinforces the assumption that Canadian exporters can take advantage of the weaker loonie and the U.S. economic recovery.
