Artis Real Estate Investment Pref Shs Series E T.AX.P.E

How will this play out for CAD REITS?

[garyreins]

https://thoughtleadership.rbc.com/boc-and-the-fed-you-gotta-keep-em-separated/Highlights:

• A resilient U.S. economy and signs of reacceleration in inflation look likely to derail Fed plans to cut interest rates by 75 basis points this year – we now look for just one 25 basis point cut in December.
• The Bank of Canada, though, still looks on track to cut rates in June.
• Beyond then, the monetary policy gap will widen with the BoC cutting deeper than the Fed. That’s also against a widening macroeconomic growth and labour market gap in Canada versus the U.S.
• There are early signs of a pickup in activities in the euro area and U.K. economies, but not enough to prevent cuts from the ECB and the BOE this year as long as inflation continues to slow.

The U.S. economy has continued to outperform other regions with GDP tracking another solid increase in Q1 and employment rising quickly despite high interest rates. More importantly, slowing inflation trends last year are showing worrying signs of reversing and reaccelerating in early 2024 – growth in the Fed’s “supercore” inflation measure (core services ex-rent) doubled to 8.2% (annualized) in March relative to last December. Federal Reserve officials have so far mostly stuck with the guidance that interest rates can begin to move lower this year. But the run of stronger inflation prints makes cuts by the summer look increasingly unlikely.  We now expect the Fed to cut the fed funds target range just once this year in December versus a June start we previously assumed.

Economic activity also looks to be improving in the Euro area and the UK but from a much weaker starting point after a soft 2023. Meantime, broadly improving inflation trends in those regions are leaving our expectations unchanged from last month, that the ECB will cut rates earlier in June, to be followed by a BoE cut in August. The Canadian economic growth backdrop continues to significantly underperform. Canadian GDP is tracking stronger than the Bank of Canada (and we) were previously expecting in Q1, but still looks much less impressive when measured against surging population growth. And a rising unemployment rate – now up 1.3 percentage points from post-pandemic lows – has outpaced most other advanced economies and leaves the BoC with the strongest case of all the central banks we track to begin cutting interest rates.