Monday, October 20, 2003
Bank of Canada holds for now
The Bank of Canada left its key interest rate at 2.75 percent. The Bank, which reduced interest rates by 25 basis points in September, has an inflation target range of one-to-three percent but targets the midpoint - two percent. Canada's core inflation rate continues to decline with the most recent reading showing a benign 1.5 percent rate of inflation. There are indications the Canadian economy is rebounding from the body blows it suffered earlier in the year from the SARS epidemic, forest fires and August's power blackout in parts of Canada, especially Ontario.
In its statement, the Bank said that economic activity and inflation indicators have evolved broadly in line with its expectations and there was evidence of gathering economic strength. This included firm growth in final domestic demand and positive signs of recovery in the U.S. and overseas economies. However, the value of the U.S. dollar has depreciated more than was expected against some major currencies, including the Canadian dollar. Looking forward, the Bank continues to expect growth in the Canadian economy to strengthen during the fourth quarter of 2003 and through 2004. The expansion should be above the rate of potential growth, supported by solid household spending and increased business investment. The Canadian job market already underpins the expansion. Unlike the U.S., Canada has created nearly 100,000 new jobs so far this year, but the pace is still sharply lower than the 434,000 jobs created in the same period last year.
ECB has new leader
European leaders finally approved Jean Claude Trichet to be the next president of the European Central Bank. He will be replacing Wim Duisenberg, who served as the Bank's first president. After assuming the presidency on November 1st, Trichet will chair his first monetary policy meeting on November 6th. Trichet has been Bank of France president since 1993, and it was in that role that he served on the ECB's governing council (as do all other national bank member presidents).
Only 11 are up for the week
Equities were up again last week as investors took heart from better economic data and earnings reports. However, they weren't above taking profits every now and then when earnings - or economic data - didn't live up to some investors' expectations. With the exception of the Paris CAC, which is up 9.5 percent on the year, all indexes followed here have double-digit gains for the year. And most of those gains have occurred since March and April.
Earnings have investors' attention
