Above-trend growth could cause U.S. inflation later in 2018

Feb 12 18:02 2018 Print This Article

Employment growth has been strong enough that the Bank of Canada (BOC) hiked its overnight target rate to 1.25% in January.1 The BOC statement attempted to balance the view that growth was near capacity with concerns that raising rates too quickly could cause the economic expansion to stall. The 10-year yield has broken through its previous peak of 2.15% on the growth story and a modest pickup in inflation.2 We believe yields should continue to move higher from these levels.

U.S.

We expect U.S. interest rates to be range-bound in the first half of 2018, but with a risk of higher yields in the second half. Our rates view is driven by our analysis of growth, inflation and monetary policy in the U.S. and globally. Our models estimate that US growth approached a near cycle high at just above 3% in the fourth quarter of 2017. Growth should remain strongly above trend at 2.75%3 in 2018.

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Trimark Investments Blog

As one of Canada’s leading investment management companies, Trimark Investments is singularly focused on putting investors' interests first. Invesco Canada offers a diversified suite of investment solutions to investors across the country and around the world. The blog is comprised of portfolio managers, who are often asked about their views on various investment-, market- and economy-related topics and how these views impact investment decisions. Trimark Investment blog intends to answer the questions Invesco Canada is frequently asked.

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