Not holding back

<p>Kia ora,</p><p>Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the international edition from Interest.co.nz.</p><p>And today we lead with news central banks seem to have called time on their brief interest rate pause signals.</p><p>Just like the RBA on Tuesday, the Bank of Canada did the unexpected and hiked their policy interest rate by +25 bps to 4.75%, <a href="https://www.bankofcanada.ca/2023/06/fad-press-release-2023-06-07/" target="_blank"><strong>saying</strong></a> their monetary policy was not sufficiently tight enough yet "to bring supply and demand back into balance" and return inflation sustainably to their 2% target. Essentially they admitted their earlier guidance that they had done enough was wrong.</p><p>Growing global concerns that inflation is stickier than expected strengthened expectations that the US Fed will also deliver another rate hike when they next meet a week from today. Currently financial markets price a 2:1 chance that the US central bank will deliver at least one +25 bps rate hike at that meeting or the next. Investors now await the key US inflation data due Wednesday next week, with a hot reading set to solidify another Fed hike after the latest payrolls report showed that the US added a remarkable +339,000 jobs in May.</p><p>It is not only Canadian interest rates that are affecting Americans. Bad air quality drifting down from Canadian wildfires is blanketing the eastern states and airports are having to close. China isn't the only place with bad air at present.</p><p>US <a href="https://www.federalreserve.gov/releases/g19/current/default.htm" target="_blank"><strong>consumer credit levels rose</strong></a> a bit more than expected in April, but at about the same pace as in March, with the gains equally split between revolving (like credit cards) and nonrevolving (car loans etc.). There are no stress signals in this data.</p><p>Separately, there is still no light at the en