Posted on October - 12 - 2010
Expecting more QE and a sidelined Bank of Canada
In recent weeks, many senior Federal Reserve officials have made public their views about the possibility of further fed easing. Although they did not present a unanimous view, FOMC Vice Chairman William Dudley made it clear, on October first, that both the current levels of unemployment and inflation were unacceptable. Since then, the far weaker than expected job report for September should have provided enough arguments to convince a majority of FOMC voting members to support a second round of quantitative easing. By how much the Fed will inflate its balance sheet remains uncertain. In our view, it will depend on what will be done on the fiscal front. Given the current situation in the U.S. and the volatile environment that is likely to ensue in foreign exchange markets, we are altering our forecast for Canadian monetary policy. We now expect the Bank of Canada to move to the sidelines for the next few months to assess the impact of global currency adjustments on the Canadian economy.
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