The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.

Authors for macroblog are Dave Altig, John Robertson, and other Atlanta Fed economists and researchers.

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December 07, 2005

Doves Land At The Bank Of Canada?

From Bloomberg:

Canada's government bonds rose and the Canadian dollar fell from a 13-year high after the Bank of Canada lifted the overnight rate by a quarter-percentage point to 3.25 percent and said inflation is slowing.

Yields on Canada's benchmark two-year government bond dropped from the two and a half-year high reached yesterday as traders trimmed bets on rate increases.

That, I think, makes them the first major central bank to officially un-sound the inflation alarm.  From the Bank's official statement, via Reuters:

Total CPI inflation, at 2.6 per cent in October, has come down more quickly than expected, primarily reflecting a rapid decline in gasoline prices. Core inflation, at 1.7 per cent in October, is in line with the Bank's projection.

Not everyone, however, is convinced that this means a reversal of the basic program.  From the National Post:

While all thoughts of a possible 50-basis-point hike from the Bank of Canada may have been banished, [Craig Wright, chief economist at Royal Bank of Canada] does think the bank may have to raise rates over a longer time period than expected. "When the Fed started their tightening cycle, people were looking at 4.0% or 4.25%; now that we're there, people say there is more to come," Mr. Wright said.

December 7, 2005 in Americas | Permalink


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Everyone looks at the 1970s and expects to see a pass-through of higher energy and raw material costs to core inflation. but in the 1970s unit labor costs rose at double digit levels, so to sustain profits firms had to raise prices. You can fully explain the 1970s inflation without refering to energy prices. Now, firms can are using higher productivity to offset oil and raw material costs so they do not have to passe these costs through.

Posted by: spencer | December 08, 2005 at 10:20 AM

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