BOC: Macklem Acknowledges Economy More Resilient Than Previously Expected
Through the Q&A, Gov Macklem continues to portray the Bank's economic outlook as largely unchanged since the October meeting, though there have been acknowledgements throughout today's communications that the economy is on more solid ground than they had expected.
- Macklem says that the upside surprise to GDP growth in Q3 and the upward revisions to prior years don't alter the Bank's outlook that there is still a negative output gap, however the gap may be smaller than was estimated in the October Monetary Policy Report (which saw the gap as being closed by end-2026):
- "The recent data, as we've discussed, is showing some improvement, and that is welcome news, but it has not changed our view that the economy is still in excess supply and we continue to expect modest growth going forward...mechanically [the 2.6% GDP growth in Q3 vs 0.5% projected in the MPR] means the output gap is smaller...we still see that slack being taken up pretty slowly."
- Replying to questions from MNI's Greg Quinn, Macklem says that while the Bank had tariff scenarios that included a recession, "at the end of the year, as we get to the end of the year, the R word people are talking about is resilience."
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EUROPEAN INFLATION: Lower Airfares In Greece Counters Other Countries' Evidence
Softer airfares within Greece October HICP push back against findings from other larger European countries (Germany, Spain, Belgium) that airfares were a material driver behind the upside surprise in Eurozone services inflation (3.35% Y/Y vs 3.2% September). We are reluctant to put too much weight on it, however.
- Greece "passenger transport by air" Y/Y HICP (6.3% Oct vs 11.5% Sep) had moved in the same direction as the Eurozone equivalent in 7 out of 9 months this year prior to the October data.
- Categories generally associated with persistent services items, such as communication, health or education, meanwhile saw mixed developments in Greece in October.
- Given Greece's 2.9% basket weighting in the Eurozone as well as its relevance as a vacation destination, potentially introducing idiosyncrasies, we would not overinterpret the data. It remains likely that at least some of the Eurozone services upside surprise was driven by volatile travel-related categories, downplaying its impact but with final details still to come.
- Remember that ECB President Lagarde in her October meeting press conference again hinted that the persistence of services inflation drivers are important.
- The final October HICP release is likely the last round of inflation data flowing into the ECB's December projections. Our full review of the October flash HICP round and some commentary on current ECB rhetoric can be found here.
- Netherlands final HICP for October is scheduled for publication tomorrow ahead of Wednesday's release from Germany.
US TSY OPTIONS: Large Jan'26 10Y Put Buyer
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US: Trump-Money Left Over From USD2k Payments Will Pay Down National Debt
President Donald Trump posts on Truth Social: "All money left over from the $2000 payments made to low and middle income USA Citizens, from the massive Tariff Income pouring into our Country from foreign countries, which will be substantial, will be used to SUBSTANTIALLY PAY DOWN NATIONAL DEBT. Thank you for your attention to this matter! President DJT"
