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What happened last week?
Volatility for equities jumped last week as the major U.S. indexes lost ½ to 2 percent, oil rose again.
It was a busy week for monetary policy as the Bank of Canada, U.S. Federal Reserve, European Central Bank and Bank of Japan who represent one-third of the global economy all released interest rate decisions.
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The Bank of Canada, which faces a difficult task to speed up a slowing economy and slow down increasing inflation, cannot both lower and raise rates simultaneously. Placing inflation expectations ahead of employment, the Bank raised interest rates for the first time in 3 years. The policy interest rate, the overnight rate, ¼ percent (25 basis points) to 2½%. Although most of the price increases have been contained to energy, the pass-through of increased energy costs will contribute to the persistence of overall inflation according to the Bank’s statement. CBC and BoC
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The Bank of Canada also released its Monetary Policy Report that indicate inflation is expected to remain above 3% for 2027 before easing with the evolution of energy prices and the trade relationship with the United States as the two most important inflation risks.
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The U.S. Federal Reserve’s Federal Open Market Committee “decided to maintain the target range for the federal funds rate at 3¾ to 4 percent” in their statement on Wednesday afternoon. A rate increase was not expected, but it is predicted for December 9th according to CME's FedWatch tool.
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A rate “hold” occurred despite the U.S. Bureau of Economic Activity reporting the Personal Consumption Expenditures price index (PCE) rose 0.5% in September and 3.6% since last year. PCE is the Federal Reserve’s preferred inflation measure and sits above the 2% goal. BEA PCE release BEA GDP release
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On Thursday, the European Central Bank held its interest rates unchanged to support weak economic growth over consumer inflation, which is above goal. The cost of energy is driving European inflation, as it is everywhere, and will be addressed in subsequent decisions. ECB release
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The Bank of Japan held its short-term interest rates unchanged after hitting its 2% inflation goal for the first time since it was established in 2013. BoJ and CNBC
What’s ahead for this week and beyond?
In Canada, imports, exports and trade balance will be reported along with an employment report for October and several Purchasing Managers Indexes (PMI).
In the U.S., PMIs, durable goods and factory orders, imports, exports and trade balance. The midterm elections will occur on Tuesday, results and effect on markets to follow. Read CNBC's analysis of midterm election effects on markets.
Globally, Japan’s PMI, wages and income, China’s PMIs and foreign exchange reserves and the Eurozone’s PMIs, consumer and producer inflation indexes and retail sales will be announced.
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