RE:RE:RE:RE:Measuring the true inflation rate Hey Francesco, this is what I believe is going to happen.
Canada will cut rates before the US does.
Canada increased the policy rate to 5% on July 12 and the 2 year government bond went from 4.66% to 4.22% as of Feb 22,2024. This is a 44 bps drop in yield which is telling me that market participants believe inflation is coming down.
In the US, the Fed Funds reached a peak on July 26 and the 2 year treasury went from 4.82% (July 26) to 4.69% on Feb 22 which is just a 13 bps drop in yield. Market participants believe inflation is sticky and reluctant to come down in the US. The 10 year is also higher which is concerning.
Tiff is being hawkish to crush the spring real estate hopes and to make sure it doesn't repeat what it did last year. Then I believe he will drop rates a quarter point when he's confident that real estate prices and inflation are under control. If unemployment spikes significantly in the first half of the year then Tiff will be forced to pivot a lot sooner than projected. I think one rate cut in the first half of the year, probably on June 12th as long as the unemployment rate remains stable.
A little bit of Economics history. The unemployment rate tends to spike almost exactly at the precise moment Central bankers pivot on interest rates. The recession usually begins within a few months from a Fed pivot.