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The Federal Reserve is seen slowing the pace of its rate hikes after a government report showed consumer prices rose less than expected last month, an indication that the central bank’s aggressive policy tightening this year has begun to bite. The Fed has raised rates more sharply this year than at any time since the 1980s to battle high inflation, delivering a fourth straight 75-basis point rate hike last week that brought the policy rate to a 3.75 per cent-4 per cent range. It was near zero in early March. Futures contracts that settle to the Fed’s benchmark rate now show traders expect that blistering pace of policy tightening to slow next month, pricing in about an 80 per cent chance the Fed will deliver just a half-point rate hike. The Fed is then seen shifting to quarter-point hikes in January, with the policy rate ultimately peaking in the 4.75 per cent-5 per cent range by March. Before the report traders had expected the Fed to raise rates above 5 per cent by then The consume...

The U.S. Federal Reserve may consider slowing the pace of rate increases at its next meeting but that should not be seen as a “softening” in its commitment to lower inflation, Federal Reserve Gov. Christopher Waller said on Sunday. Markets should now pay attention to the “endpoint” of rate increases, not the pace of each move, and that endpoint is likely still “a ways off,” Waller said in response to a series of questions on monetary policy at an economic conference organized by UBS in Australia. “It depends on inflation.” “We’re at a point we can start thinking maybe of going to a slower pace,” Waller said, but “we’re not softening...Quit paying attention to the pace and start paying attention to where the endpoint is going to be. Until we get inflation down, that endpoint is still a ways out there.” A report released last week showing slower than expected inflation in October was “good news,” but was “just one data point” that would have to be followed with other similar readings t...

The European Central Bank building, in Frankfurt, Germany, on July 21. WOLFGANG RATTAY/Reuters The European Central Bank needs to keep raising interest rates but must not move too fast to avoid unnecessarily exacerbating a downturn, two policy-makers said on Monday, with one of them making the case for slowing the pace of policy tightening soon. The ECB has raised rates by a combined 200 basis points since July, its fastest pace of tightening on record, and market pricing suggests it is just over halfway done with the next move in the form of a 50– or 75-basis-point hike coming in December. Fabio Panetta, a member of the ECB’s board, argued that excessive hikes could deepen a downturn as policy tightening is already set to cut more than one percentage point from GDP growth each year until 2024. “If we were to compress demand in an excessive and persistent manner, we would face the risk of also pushing output permanently below trend,” Panetta said in a speech in Florence. “For as long...

Canada Mortgage and Housing Corp. says the annual pace of housing starts slowed in October from its high for the year reached in September. The national housing agency says the seasonally adjusted annual rate of housing starts in October was 267,055 units, down 11 per cent from 298,811 units in September. The annual pace of urban starts was down 11 per cent at 245,234 units in October as multi-unit urban starts fell 13 per cent to 188,189 units. Urban starts of single-detached homes dropped four per cent to 57,045 units. CMHC says the annual pace of starts was down in Toronto and Vancouver, however Montreal posted an increase. Rural starts were estimated at a seasonally adjusted annual rate of 21,821. The six-month moving average of the monthly seasonally adjusted annual rate was 277,667 units in October, up 0.5 per cent from 276,374 in September. https://www.tausiinsider.com/annual-pace-of-housing-starts-in-canada-slowed-in-october/?feed_id=350691&_unique_id=648a5981c56e0

The Canadian dollar CADUSD gained slightly against its broadly weaker U.S. counterpart on Thursday after the Federal Reserve sent a dovish signal on the pace of interest rate hikes and as oil prices steadied. The loonie was up 0.1% at 1.3340 to the greenback, or 74.96 U.S. cents, in a quiet North American session with U.S. markets closed for Thanksgiving. The currency traded in a range of 1.3317 to 1.3362. “The USD tone remains defensive,” Shaun Osborne, chief currency strategist at Scotiabank, said in a note. The greenback swooped towards a three-month low against a basket of major currencies and world shares touched a two-month high after minutes from the Fed’s latest meeting, released on Wednesday, pointed to a slower pace of U.S. rate rises from next month. The Bank of Canada has already downshifted the pace of its rate increases but is likely not done yet with tightening. Money markets are pricing in a 25 basis point move at the next policy decision on Dec. 7. “Resilient growth,...

The Canadian dollar CADUSD weakened against its U.S. counterpart on Friday, giving back its weekly gain, as oil prices fell and the greenback gained ground against a basket of major currencies. The loonie was trading 0.3% lower at 1.3380 to the greenback, or 74.74 U.S. cents, in a quiet session for North American financial markets after the U.S. Thanksgiving holiday. The currency moved in a range of 1.3318 to 1.3398. For the week, it was nearly unchanged. The U.S. dollar rose but remained near multi-month lows as investors weighed prospects of the Federal Reserve moderating the pace of its policy tightening. The Bank of Canada has also been raising interest rates. Canadian third-quarter GDP data and the November employment report, due next week, could guide expectations for the pace of additional tightening. The price of oil, one of Canada’s major exports, settled 2.1% lower at $76.28 a barrel, closing a week marked by worries about Chinese demand and haggling over a Western price ca...

U.S. employers hired more workers than expected in November and increased wages, shrugging off mounting worries of a recession, but that will probably not stop the Federal Reserve from slowing the pace of its interest rate hikes starting this month. Despite the strong job growth, some details of the Labor Department’s closely watched employment report on Friday were a bit weak, which economists said could be flagging upcoming labour market weakness. Household employment decreased for a second straight month. About 186,000 people left the labour force, keeping the unemployment rate unchanged at 3.7 per cent. Labour market tightness and strength keeps the Fed on its monetary policy tightening path at least through the first half of 2023, and could raise its policy rate to a higher level where it could stay for sometime. It also underscores the economy’s resilience heading into was is expected to be a tough year. “November’s labour market report was clearly bad news for the Fed’s war on...

The Canadian dollar CADUSD weakened against its U.S. counterpart on Friday as domestic jobs data caused few surprises, while a stronger-than-expected U.S. jobs gain ran counter to hopes that the Federal Reserve would soon slow the pace of rate hikes. The loonie was trading 0.4 per cent lower at 1.3485 to the greenback, or 74.16 U.S. cents, after trading in a range of 1.3421 to 1.3520. For the week, it was down 0.8 per cent. “The strong U.S. employment data has lent some support to the USD but has caused U.S. equities to sell off on the prospect of higher rates,” said George Davis, chief technical strategist at RBC Capital Markets. “We have seen persistent CAD selling on the crosses this week,” said Davis, adding that these flows, against currencies such as the euro, sterling and the yen, weighed on the Canadian dollar. U.S. stock indexes fell as the U.S. jobs data reignited investor concerns about the Federal Reserve continuing on its path of aggressive monetary policy tightening. Ca...

Bank of Canada Governor Tiff Macklem takes part in a news conference in Ottawa, on Oct. 26. PATRICK DOYLE/Reuters Last Friday’s employment report from Statistics Canada may have looked like a yawner to the casual observer, but for Bank of Canada Governor Tiff Macklem, the details were far from ho-hum. Sure, the 10,000-job blip in employment growth last month is effectively a rounding error in Statscan’s monthly labour force survey. But the broader trends emerging from the labour data are pivotal to the central bank’s charting of the future course of interest rates. Mr. Macklem has made it clear that he sees restoring the labour market to balance – bringing demand for workers more in line with supply – as central to the bank’s goal of returning inflation to its 2-per-cent target. As Mr. Macklem and his colleagues deliberate over Wednesday’s interest-rate decision – widely seen as a choice between another oversized, half-point hike and a smaller, quarter-point increase – some key detai...

Canadian economic activity expanded at a faster pace in November and a measure of price pressures cooled, Ivey Purchasing Managers Index (PMI) data showed on Tuesday. The seasonally adjusted index rose to 51.4 in November from 50.1 in October. The Ivey PMI measures the month to month variation in economic activity as indicated by a panel of purchasing managers from across Canada. A reading above 50 indicates an increase in activity. The gauge of employment dipped to an adjusted 54.3 from 54.6 in October, while the prices index was at 63.5, down from 69.8. The unadjusted PMI edged up to 51.5 from 51.4. https://www.tausiinsider.com/canadian-economic-activity-expanded-at-faster-pace-in-november-ivey-pmi-shows/?feed_id=330436&_unique_id=644b447454db2

U.S. producer prices increased a bit more than expected in November, but the underlying trend in inflation is moderating, which could allow the Federal Reserve to slow its pace of interest rate hikes next week. The producer price index for final demand rose 0.3% last month, the Labor Department said on Friday. Data for October was revised higher to show the PPI gaining 0.3% instead of 0.2% as previously reported. In the 12 months through November, the PPI increased 7.4% after advancing 8.1% in October. Economists polled by Reuters had forecast the PPI climbing 0.2% and rising 7.2% year-on-year. The report came ahead of the Fed’s policy meeting next Tuesday and Wednesday. Fed Chair Jerome Powell said last month that the U.S. central bank could scale back the pace of its interest rate hikes “as soon as December.” The Fed is in the midst of the fastest rate-hiking cycle since the 1980s. Inflation is gradually slowing as supply chains ease and demand for goods ebbs. The Institute for Sup...

The Canadian dollar CADUSD rallied against its broadly weaker U.S. counterpart on Tuesday, as data showing an easing of U.S. inflation pressures supported bets the Federal Reserve would dial back the pace of its interest rate hikes. U.S. stock index futures rallied and the greenback fell against a basket of major currencies as U.S. core consumer prices rose 0.2 per cent last month after increasing 0.3 per cent in October, with the year-over-year pace slowing to 6 per cent. The Fed is widely expected to raise rates by half a percentage point on Wednesday after tightening in steps of 75 basis points in recent months. The Bank of Canada has also been raising rates at a rapid pace. It is trying to hike enough to tame inflation without forcing the economy into a deep recession, but the greater risk of the two is sticky inflation, which would require “much higher” rates, Governor Tiff Macklem said on Monday. Money markets see a one-third chance the BoC would tighten by 25 basis points at i...

Traders boosted bets Tuesday that cooling inflation will allow the Federal Reserve to continue to taper its interest-rate hikes into next year and likely end them in March, after a government report showed consumer prices last month rose at their slowest pace in nearly a year. Fed funds futures prices implied a better-than-even chance that the Fed will follow an expected half-point interest-rate hike at its policy-setting meeting this week with smaller 25-basis-point rate hikes at its first two meetings of 2023, with some chance the last hike could come in May instead of March. That would bring the policy rate to the 4.75 per cent-5 per cent range, lower than some economists have expected and markets had been betting, given what has been stubbornly high inflation and a stronger-than-expected labor market. The shift in expectations came after a Labor Department report showed consumer prices rose 0.1 per cent in November from the month prior, less than forecast. The slowdown, from a 0....

The European Central Bank building, in Frankfurt am Main, Germany, on Dec. 15. DANIEL ROLAND/AFP/Getty Images The European Central Bank eased the pace of its interest rate hikes on Thursday but stressed significant tightening remained ahead and laid out plans to drain cash from the financial system as part of a dogged fight against runaway inflation. After being wrong-footed by sudden price rises, the ECB has been raising rates at an unprecedented pace. Inflation has soared since economies reopened after the COVID-19 pandemic, driven by supply bottlenecks and then surging energy costs following Russia’s invasion of Ukraine. In a move shadowing similar steps this week by the Federal Reserve and Bank of England, it raised the rate it pays on bank deposits by 50 basis points to 2 per cent, moving further away from a decade of ultra-easy policy. That decision, which was expected, marked a slowdown in the pace of tightening from 75-basis-point increases at each of the ECB’s two previous m...

Canada Mortgage and Housing Corp. says the annual pace of housing starts in November edged down 0.2 per cent compared with October. The national housing agency says the seasonally adjusted annual rate of housing starts in November was 264,159 units, down from 264,581 in October. The result came as the annual pace of urban starts was flat at 242,644 units as multi-unit urban starts rose two per cent to 190,415, but single-detached urban starts fell seven per cent to 52,229. The annual pace of starts in Toronto and Vancouver rose, but Montreal saw a drop. Rural starts were estimated at a seasonally adjusted annual rate of 21,515. The six-month moving average of the monthly seasonally adjusted annual rates of housing starts was 274,361 in November, down from 277,044 in October. https://www.tausiinsider.com/annual-pace-of-housing-starts-in-canada-edged-down-in-november-cmhc-says/?feed_id=328182&_unique_id=641c26e84861b

European Central Bank policy-makers Luis de Guindos and Yannis Stournaras on Thursday joined a chorus of euro zone central bankers supporting more euro zone interest rates increases at the pace of last week’s hike to tame inflation. The ECB raised its key interest rates by 50 basis points seven days ago and President Christine Lagarde signalled as many as two more hikes of the same magnitude after acknowledging that inflation would not to fall to the ECB’s 2 per cent target until the end of 2025. De Guindos, the ECB’s vice-president, said “increases of 50 basis points may become the new norm in the near term” and last for a “period of time” despite a shrinking economy. “If we do nothing, the situation would be worse because inflation is one of the factors behind the current recession,” he told French newspaper Le Monde. De Guindos also said he was concerned that markets could underestimate the persistence of inflation and that they might consider current easy fiscal policy to be inco...

Canada Mortgage and Housing Corp. says the annual pace of housing starts in December slowed five per cent compared with November. The national housing agency says the seasonally adjusted annual rate of housing starts in December was 248,625 units compared with 263,022 in November. The drop came as the annual pace of urban starts fell five per cent to 227,708. The rate of multi-unit urban starts dropped four per cent to 182,850, while the pace of single-detached urban starts fell 11 per cent to 44,858. Rural starts were estimated at a seasonally adjusted annual rate of 20,917 units for December. The six-month moving average of the monthly seasonally adjusted annual rates of housing starts was 269,930 in December, down one per cent from 273,801 in November. https://www.tausiinsider.com/canadas-annual-pace-of-housing-starts-slowed-in-december-cmhc-says/?feed_id=323944&_unique_id=63e8da9185dca

European Central Bank president Christine Lagarde speaks during the 53rd annual meeting of the World Economic Forum, in Davos, Switzerland, on Jan. 19. LAURENT GILLIERON/The Associated Press The European Central Bank pushed back on Thursday against market bets that it would slow the pace of its interest rate hikes given recent falls in inflation and easing pressure to keep up with policy moves by other central banks. Traders had recently trimmed their expectations for how much the ECB would raise borrowing costs, comforted by data showing lower inflation in both the euro zone and the United States and related talk of smaller hikes by the U.S. Federal Reserve. But ECB President Christine Lagarde and fellow policy maker Klaas Knot said investors were underestimating the ECB’s determination to bring inflation in the 20-nation euro zone back to its 2 per cent target, from 9.2 per cent last month. “I would invite them to revise their positions,” Lagarde said during a panel conversation in...

The Federal Reserve will probably need to raise interest rates to “just above” 5 per cent and then hold them there for a period, Boston Fed President Susan Collins said on Thursday, the latest U.S. central banker to maintain a higher policy rate is needed to successfully bring down inflation. “I anticipate the need for further rate increases, likely to just above 5 per cent, and then holding rates at that level for some time,” Ms. Collins said in prepared remarks to a conference organized by the Boston Fed, echoing a near-unanimous sentiment expressed by her rate-setting colleagues in recent weeks. Ms. Collins also said it was now appropriate to slow the pace of rate hikes, after the central bank last year lifted borrowing costs at the fastest pace in 40 years in order to bring down high inflation by dampening demand across the economy. The Fed’s benchmark overnight lending rate currently sits in a target range of 4.25 per cent to 4.50 per cent and a quarter percentage point hike is ...

A sold sign stands outside a home in Wyndmoor, Pa., on June 22, 2022. Matt Rourke/The Associated Press U.S. home sales tumbled to the slowest pace in nearly a decade as soaring mortgage rates and sky high prices in 2022 pushed homeownership out of reach for many Americans. The National Association of Realtors said Friday that existing U.S. home sales totalled 5.03 million last year, a 17.8 per cent decline from 2021. That is the weakest year for home sales since 2014 and the biggest annual decline since 2008, during the housing crisis of the late 2000s. The median national home price for all of last year jumped 10.2 per cent to $386,300, the NAR said, and it’s up 42 per cent from 2019, before ultralow mortgage rates and pandemic-fueled demand sent the market into a frenzy. That translates to a median $114,000 increase in housing wealth in three years. “So, homeowners have done well during this housing (market) from 2019 through Covid until now,” said Lawrence Yun, the NAR’s chief eco...