HIGHLIGHTS OF THE WEEK – September 26/16

United States
• The Bank of Japan announced two new policy measures this week, aiming to target the interest rate on
the longer-end of the curve at zero, and pledging to let inflation overshoot the target – effectively committing
to be slightly irresponsible. Still, a lack of an interest rate cut fanned the view that the BoJ may
be running out of ammunition, which together with fears that these moves are too late, has thrown into
question the efficacy of the new measures.
• The Fed also left its policy rate unchanged on Wednesday, albeit only “for the time being.” The case for
a rate hike has strengthened, according to the Fed, with three members wanting to lift rates this week –
exemplified by a rare triple dissent. The Fed has all but set itself up for a hike later this year, with most
members remaining optimistic for the economic outlook. Having said that, future rate hikes are likely to
be more gradual, with the Fed’s own projections toned down alongside potential growth estimates.

Canada
• It was a decent week for the Canadian economy, with rising oil prices leading equity markets and the currency
higher. Decent trade volumes growth broke a four month downtrend, pointing to some momentum
heading into the third quarter.
• Governor Poloz broke with the generally positive market tone, delivering a speech reminding Canadians
of the factors that will push trend economic growth – and by extension, interest rates – lower over the
coming years.
• Poloz’s remarks on “living with lower for longer” reinforce our view that it is likely to be early 2019 before
we see any change in the Bank of Canada’s policy rate.

For further information, please contact:

John Maveety Manager, Residential Mortgages – Greater Ottawa Area TD Canada Trust
T: (613) 371-1984 F: (888) 899-1984 P: (866) 767-5446
John.Maveety@td.com