While the exact timing of changes in investors’ assumptions is difficult to predict, the fact that some reassessment took place, at some point, is not that surprising. Above-trend growth at a time of low unemployment should be expected to see inflation lift, even if that lift is gradual because of factors that are affecting wage and price pressures globally.
We noted that central bank actions have been supporting financial markets and that prices in many markets have been reflecting an easing of concerns about the possibility of a global recession. However, it is clear that trade conflicts remain the biggest risk to the Canadian and global economies and the related uncertainty is continuing to dampen exports and growth.