Week in FX Americas – The Loonie Wallows In No Man's Land
The currency that the new governor of the Bank of England is leaving behind, managed to quietly slip to a 10-week low on Friday. It was not even in sympathy to its sister currency's plight 'down-under.' Friday's reasons had more to do with its domestic CPI print proving that inflation can still surprise on the downside. This seems to be the new global reality – domestic inflations are benign.
However, it's not governor Carney's concern anymore. When monsieur Poloz takes the reins he may need to start worrying about the sharp underperformance to the downside of inflation. His first course of action may require him to remove the central banks mild tightening bias.
Raising interest rates is never popular, but keeping rates low for too long builds in persistent problems for the economy. Interest rates in nominal terms are at record low levels and negative in real terms. The symptoms of distortions created by low interest rates could lead to unfunded pensions,...
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