Summary
United States: Spring Break Is Over
- On balance, this week’s data show the U.S. economy is losing momentum, as the lagged effects of the FOMC’s rapid pace of monetary policy tightening appear to be slowing growth as intended. In March, retail sales fell 1.0%, manufacturing production slipped 0.5% and the consumer price index rose a modest 0.1%.
- Next week: Housing Starts (Tue), Existing Home Sales (Thu), Leading Economic Index (Thu)
International: Bank of Canada’s Waiting Game Continues
- The Bank of Canada (BoC) again held its policy rate steady at 4.50% at its monetary policy meeting this week. The central bank said growth in early 2023 will be stronger than previously forecast and that it remains prepared to tighten further if needed. At the same time, it expects past rate hikes will see growth slow as the year progresses and also expects inflation to slow quickly to around 3% by the middle of this year. Overall, we think the BoC remains comfortably on hold for now, with the main risk being that resilient economic trends see monetary easing beginning later than we currently expect.
- Next week: China GDP (Tue), U.K. CPI (Wed), Eurozone PMIs (Fri)
Interest Rate Watch: FOMC on Path for 25 bps Rate Hike on May 3
- With volatility in financial markets subsiding recently and with inflationary pressures remaining elevated, we look for the FOMC to hike rates by another 25 bps at its May 3 meeting. But we also think May 3 will mark the end of the tightening cycle that has been in place since last March.
Topic of the Week: Nothing Is Certain in Life Except Death and Taxes
- As millions of Americans have poured over their W-2s and 1099s in recent weeks, the culmination of the filing season will have important implications for the fiscal outlook, including the debt ceiling.
