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May 10, 2024 | Monetary Easing Tends To Be Contagious and No Quick Fix

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel ( Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog:

This week, the Swedish central bank followed Switzerland in becoming the second G10 nation to ease base rates in the banking system. Both cited weakening economic activity.

The Bank of Canada is expected to follow suit this summer, with 45% of outstanding Canadian mortgages up for renewal this year and next. Most were taken out when interest rates were an abnormally low sub 3% (2020-21). Now, debt service costs are leaping while unemployment is on the rise. This is negative for consumption-driven economies where GDP growth depends heavily on ever-higher spending on goods and services.

Once they start, central bank easing efforts tend to be contagious, and it’s quite likely that the Bank of Canada will end up easing faster than is presently priced into asset markets. However, monetary easing is no quick fix and typically takes several quarters to filter through the economy. Royce Mendes follows the Canadian data closely.

Royce Mendes, managing director and head of macro strategy at Desjardins, joins BNN Bloomberg to discuss the health of the Canadian consumer as retailers post cautious outlooks. Mendes says higher interest rates do a lot more to slow down spending in Canada than in other countries. Mendes also discusses the housing market and his top economic concerns. Here is a direct video link.

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May 10th, 2024

Posted In: Juggling Dynamite

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