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Wall Street Pauses as Fed Meeting Looms: Futures Hold Steady

U.S. stock futures were little changed on Tuesday as investors awaited the start of the Federal Reserve’s final policy meeting of the year. The Dow Jones Industrial Average, S&P 500, and Nasdaq futures all hovered near flat, reflecting a cautious mood across Wall Street. The Fed is widely expected to keep interest rates unchanged, but traders are focused on Chair Jerome Powell’s comments and the central bank’s updated economic projections. Markets are looking for clues on when rate cuts might begin in 2024, with inflation cooling but still above the Fed’s long-term target. Recent gains in equities have been fueled by optimism that the Fed’s tightening cycle is over, yet uncertainty remains about how quickly monetary policy will shift toward easing. Until then, investors appear content to hold their positions, waiting for clearer signals from the Fed before making bold moves.
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Bank of Canada Treads Carefully Amid Stagflation Risks

                                            Bank of Canada in Ottawa

The Bank of Canada is adopting a cautious stance as concerns about stagflation—sluggish economic growth paired with persistent inflation—loom over the Canadian economy. Former governor Stephen Poloz explained that the central bank is currently in risk management mode, balancing the conflicting pressures of weak growth and rising prices.

Poloz noted that the Bank faces a dilemma: cutting interest rates could cushion the blow of slowing growth and rising unemployment, but raising rates might be necessary to keep inflation under control. In such a scenario, the most prudent course of action may be to do very little, carefully monitoring incoming data before making any major policy moves.

This balancing act reflects the uncertainty created by global trade tensions and domestic economic challenges. Businesses and investors remain wary, with the potential for stagflation adding to the complexity of decision-making. Poloz emphasized that the Bank’s approach is not about aggressively steering the economy but rather about managing risks in real time, weighing whether the dangers of weak growth outweigh the threat of higher inflation.

The concept of stagflation, which combines stagnation and inflation, recalls the economic turbulence of the 1970s. While Canada is not yet in a full stagflationary environment, the risk is significant enough to warrant caution. Poloz’s comments highlight the delicate position of policymakers who must navigate between supporting growth and preventing runaway inflation.

For Canadians, this means monetary policy may remain steady in the near term, with the Bank of Canada opting for restraint rather than bold moves. The central bank’s priority is to safeguard economic stability while preparing for potential shocks that could tip the balance toward stagflation.


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