United States
• The Fed’s acknowledgement that underlying inflation is no longer perceived as subdued was an important signal to the markets and highlighted that core inflation is gradually inching higher.
• At the same time, the Fed trimmed its economic growth forecasts for 2011 and 2012, but left its 2013 unchanged. While growth forecasts came down, the view remains that the slowdown is transient.
• The troubled housing market will remain the major domestic downside risk to economic growth. In May, the demand for housing weakened as both new and existing home sales declined.
• On a positive note, the stronger than expected durable goods orders offers a positive sign about economic growth as we head into the second half of the year.
Canada
• Risk remained the dominate theme in Canadian financial markets this week.
• The Bank of Canada issued a publication this week stating that some risks were more heightened than they were in the spring. Examples of the top risks on the central bank’s list include: (1) European sovereign debt concerns; (2) U.S. fiscal and debt challenges; and (3) elevated household debt levels here at home.
• Markets responded well at week’s end to developments in Europe, but a resolution to the crisis remains fleeting. A plunge in crude oil prices on Thursday didn’t help matters either.
Courtesy of TD
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