Author: Danny Popescu | September 20, 2021
For the second consecutive week most markets lost ground except for oil. The losses for equities were not as severe as the previous week but were also not inconsequential. Inflation fears and resultant monetary policy responses have heavily influenced markets lately.
Inflation in Canada surged to its highest level since 2003 as prices in August rose 4.1% compared with a year earlier. Comparing July 2020 to July 2021 the inflation rate was 3.7%. August becomes the fifth consecutive month where inflation exceeded the Bank of Canada’s target annualized year-over-year rate of 2%. Our central bank maintains that this heightened inflation level is temporary. Also, when measuring the rate of inflation since the pandemic began the overall rate is only slightly above the 2% target.
In the US, the year-over-year inflation rate fell slightly from 5.4% in July to 5.3% in August. The month-to-month inflation rate also declined. Prices rose 0.3% in August compared to July, down from 0.5% for the period of June to July. This very slight moderation, and the lower core rate of inflation at 4.0% for August versus 4.5% for July, supports the Federal Reserve’s position to maintain current programs.
It appears that inflation is peaking, but not disappearing, which removes the pressure on the Federal Reserve, Bank of Canada and other central banks to take more immediate action to slow inflation.
Looking ahead, Canadian retail sales for July and the new housing price index for August will be released. The Federal government has tentatively scheduled a release of July’s budget balance. A summary of party stances on election issues can be found at https://www.theglobeandmail.com/politics/article-canada-federal-election-20210-party-plaform-guide/
In the U.S., housing starts, building permits, existing home sales for August will be announced. The Chair of the Federal Reserve, Jerome Powell, will speak following the Federal Open Market Committee’s announcement of monetary policy and an update to economic projections.
Globally, capital markets are closed at the beginning of the week in Japan and China. Eurozone consumer confidence, manufacturing and service Purchasing Managers Indices (PMI) will be released. The Bank of England will announce its monetary policy, and the European Central Bank released its economic projections.
PS. If you haven’t voted yet, today is the last day to do so and it’s important that our voices are heard.
Have a great week.
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