In a rare central bank acknowledgment of the stickiness of inflation, the Bank of Canada, while keeping their benchmark rate at 1.0% as expected, hinted at a rate hike soon. With y/o/y CPI at 2.0%+ for 17 straight months, the BoC today said “In light of the reduced slack in the economy and firmer underlying inflation, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate, consistent with achieving the 2% inflation target over the medium term.” Of course with a healthy economy, the BoC has more room to focus on inflation instead of growth but strictly from an inflation standpoint, inflation readings in the US, UK and Euro zone are similar to those of Canada. The lack of needed deleveraging we know is what will have the Fed’s benchmark rate at zero, the UK at .50% and the Euro zone at 1.0% for a while on top of massive balance sheets.
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