Thomas Feltmate

[music] >> Hello I'm Greg Bonnell and welcome to MoneyTalk Live, brought to you by TD Direct Investing.

every day I'll be joined by guests from across TD, many of whom you will only see here. We we'll take you through with moving markets and answer your questions about investing.

Coming about today show, we will discuss the chances of the world's largest economy tipping into a recession this year with TD Senior Economist Thomas Feltmate. And in today's WebBroker education segment, Bryan Rogers will walk us through how dividend reinvestment plans work and how you can set them up on the platform.

You can email us any time by emailing moneytalklive@td.

com or fillet that your response box right here on WebBroker.

Before we get to our guest of the day let's get you an update on the markets. A bit of an indecisive trade with the Americans back in the action. We have some green on the screen but pretty modest.

Seeing a bit of push and pull between some of the commodity names.

Getting a bit of pressure on the downside. So let's start with mega energy. We do have crude oil, indeed 80 bucks and $0.

30 a barrel for the American benchmark. So we have mega energy and almost 2%. Some weakness in the Goldmine, let's take a look at Kinross. Some coming out with some production numbers and perhaps not pleasing. I know Barrick came out but not too sure about Kinross.

The Americans, after Martin Luther King Day are back to trading and it's a bit choppy on either side to breakeven.

Right now just a few points for the S&P 500 and the whole. We were positive before we went negative…with the big banks it's a bit of a mixed bag including today with some of the Wall Street heavyweights.

The tech heavy NASDAQ, some money on the screen but modestly positive just a few ticks to the upside.

Nvidia, 175 bucks and changes share, up, we will call that 3 3/4 of a percent. And that's your market update.

With slowing growth in the minds of many investors, what are the chances of the world's largest economy tipping into a recession this year?

Joining us now to discuss is Thomas Feltmate, Senior Economist with TD. Great to have you here.

This is the big question, after a year of great rate hikes, what is that due to the US economy?

>> That's the million-dollar question right now whether or not the US economy will tip into a recession.

I think if we take a step back and we look into 2022, Q3 growth was strong over an annual basis. We still have that Q4 data print yet but things for all intents and purposes are tracking close to 2 1/2% and embedded and that is attracting on consumer spending that's looking to be about 3%. To give some context here, that's going to be the healthiest pace of consumer spending that we would've seen in 2022.

To your point, it's kind of coming at the end of the year after that cumulative 425 basis point tightening from the feds. So we're definitely seeing some degree of resilience on the consumer side of things.

So this is not necessary indicative of what we think about an economy that would be on the cusp of a recession.

We also kind of look to the labour market. We just got employment data a few weeks ago in December.

The US economy had 223,000 jobs.

Still a pretty healthy level of employment gains on a monthly basis.

Employment rate fell at the lowest level we've seen in nearly 50 years.

Again, not necessarily indicative of a recession over the next 3 to 6 months.

>> It's been a strange couple of years. Probably the understatement of the show.

Our things not adding up though?

We talked about the aggressive rate hiking cycle, the consumer is resilient, the labourers are resilient… There seems to be some weakness in that part of the economy with the data numbers.

Our things uneven at the moment?

>> I think that's fair to say. If we look across the sweep of different manufacturers or service sectors for December, we are definitely seeing some softness coming through across all readings.

So I think it could be indicative of the rapid pace of adjustments finally kind of playing a degree of catch up on the economy. Economists have been beating on this drum. The rate hikes, there is some time for those to play into the economy and that can take anywhere from 12 to 18 months.

We know monetary policy, with some degree we are starting to see this now playing out. But I think there is probably some degree of resilience still in the economy today.

Particularly in the consumer side of things which could perhaps help it stave off a recession.

>> That would be the fine balancing acts.

Our central banks here to raise rates so aggressively.

Let's try to put the brakes on things. Putting inflation down. They warn us it will be with pain and perhaps an economic slowdown. But if were not to get the slowdown, what do the central banks have to do?

Where is the happy spot for them right now to try and figure all this out?

>> I think were definitely getting at the slowdown. If we look at when our expectations are for growth both this year and next year, we are expecting a sub 1% space of growth. Comparing that to 2022, that will be about half the pace of growth that we saw last year.

So definitely some deceleration in underlying activity there. I think where the Fed is nearing now is a point where they are likely to reach a point over the next couple of months where they will pause on rate hikes.

So our expectations, when they meet in February, likely further dialling back the pace of rate hikes going to something more normal with 25 basis point move, then probably something similar get in March we see another 25 basis point hike.

This will give the terminal rate up to about five… We've kind of seen some expectations coming in from markets where, you know, they are almost hearing this.

The end of the tightening cycle is near.

But I think the one thing that might be getting lost in all of this is that while the terminal rate might be reached over the next couple of months, the real effective policy rate is can he continue to increase as nominal rates stay elevated but that inflation rates are falling. To give some context, we have 50 basis points and tightening from the next couple of months from the Fed.

But inflation, we will see an increase in the policy rate with another 200 basis points.

>> Pretty important to think about in terms of long-term trajectory about the central banks and what it can mean for the economy.

There seems to be a bit of disagreement in terms the bond market and what they think the US Federal Reserve and what central banks will do later this year.

With the central bank even tells you. Saying "we will get to a certain point then we are going to stay there.

Because we don't want to make the mistake of then reversing too quickly and the bond markets like that".

Is this sort of a battleground?

>> Yeah I think that's probably a fair assessment. I think overseeing her now the bond market is there definitely acknowledging some of the softer reading in particular like we saw on the wage side of things. We saw a revisions to the prior months showing that wage growth is a bit weaker and then certainly we saw deceleration at the month over month growth over December which came in below market expectations.

So that was certainly one reading to suggest that, you know, maybe things are a bit softer than previously expected and then the December inflation report as well, we are getting more convincing evidence that inflation is indeed starting to roll over.

And I think that giving market hope some optimism that things could turn a bit quicker than the Fed is currently anticipating.

>> How does that path look?

Underpinning all of this of course inflation and trying to bring it back down to the target rate. You have the latest Canadian print which shows easing on the headline and the last US print shows easing on the headline.

So things are moving in the right direction but at the same time, still far above the target range.

What kind of path are we on to sort of get back to normal inflation?

>> I think the latter half of last year we definitely saw inflation kind of peak in June and then start to turn lower in the second half. So the headline measure came by about 2 1/2 percentage points of course we saw CPI fall from about a percentage point from its peak.

What was really truly driving the downward pressure on prices, falling about 15% in the second half of the year, then we did see in more recent months core goods prices rollover.

This is kind of a byproduct of a few things.

We are seeing some normalization in the supply chain.

Supply chain issues which definitely put a lot of upward pressure on prices earlier in the pandemic. And then we are also seeing consumer demand kind of pivot away from more goods oriented consumption towards more service based consumption. So that's a lot to really kind of rollover.

Now, the interesting thing here is goods only account for about 25% of that core CPI basket.

So there's only so much dis-inflationary pressure that can come from that part of CPI. The rest, the majority of heavy lifting has to come from the service side of things.

I think here is where we are seeing a lot more stickiness. So when we are thinking about service inflation, really we can kind of bucket it into two categories.

The shelter component and then that next shelter component. Through the latter half of last year we saw continued acceleration in the shelter part of CPI. This kind of at odds with what we are seeing from what we are seeing with market-based prices.

Things have peaked and are starting to rollover but it takes considerable time for that to really rollover into the stock of outstanding leases which ultimately is what is feeding into CPI and will generate that downward pressure on inflation from the shelter side of things.

If we strip that out, and we are looking at just that core services, these are the more labour-intensive categories in here, you know, we can think about things like airfares, haircuts and cleaning services etc. So definitely more labour-intensive and in these industries we are still seeing job opening rates at historically elevated levels and that leads to a lot of wage pressures passed on to the consumer.

So really getting that second leg lower is going to be cooling the labour markets such that we see wage pressures ease and lower labour costs ultimately what will you be passed on to the consumer which will create some different disinflationary pressure.

>> Fascinating stuff and a lot to keep your eyes on. We will get back to your questions with Thomas Feltmate in just a moment's time.

A reminder that you can email us anytime at moneytalklive@td.com or Philip if your response box under the WebBroker video player.

The annual pace of inflation continues to slow in Canada easing to 6.3% in December. Motorists saw a pullback in prices at the pumps and food inflation cool slightly.

TD Economics notes while inflation continues to come off the boil, it's still running well about the Bank of Canada's target range.

It expects our central bank to raise interest rates another 25 basis points next week.

Goldman Sachs reported its widest earnings miss in more than 10 years on falling revenue and rising expenses.

It was a different story for Morgan Stanley were strength in the Wealth Management business help the bank beat earnings estimates for its most recent quarter.

Lightspeed Commerce says it will cut 300 jobs, representing some 10% of its workforce as part of a reorganizationplan. In the e-commerce platform says the move will result in a cash charge up to $14 million in its fourth quarter. LightSpeed is scheduled to deliver its quarterly results early next month. And here's how the main benchmark index in Canada is trading.

Back now with Thomas Feltmate taking your questions: rising used car prices were a big driver for inflation last year. Is this still an issue?

>>… We did start to see some reprieve there.

Now what's interesting is the measure that is commonly quoted is going to be the used vehicle price reported by a representation of what dealers are paying an option.

So we've seen a 16/17% follow that measure but what's ultimately being passed on to the consumer, we can see this in inflation data, is prices only fall by about half of that. So we are still seeing dealers hold onto that and it is slowing but I think ultimately it is a good thing of what's to come and we should see more disinflationary pressure from both used and new vehicle prices.

>> It's interesting you talk about the dealers holding onto that bit of margin.

It makes sense from their perspective in terms of the times that we've been through.

When it that start to change for the used car industry?

What will be the economic backdrop to realize we have to pass through the full savings or whatever you want to call it, full price reduction on to the consumer?

Would it be following consumer demands?

>> I think I will be fair to say. And on the new side we have to remember that used prices have been somewhat elevated because there is been limited supply just because the new market has been so tight. So we haven't seen that normal turn were people are turning in their vehicles.

Now, through the second half of this year, we expect some normalization in production supply issues which should lead to a normalization in overall North American production, bringing more inventory to the market.

That in itself should drive more turn and supply in the used market. So supply side will improve when I think demand is likely to soften as the interest rates really start to catch up to things and this combination of forces should continue to put down her pressure on prices.

>> Obviously supply chain issues during the pandemic when across distant different goods and supplies.

Microchips and new cars, selling new cars, the demand for used cars went through the roof.

Things are starting to work their way through the system? Is it figured out?

>> I would necessarily go that far.

The inventories take higher I would not necessarily go that far rather.

We could see at least on a monthly basis that kind of production get back to something that would look closer to pre-pandemic levels.

But we must remember that inventories are coming from such a low level that it will take considerable time to really improve the market situation there. So, you know, to that degree we should demand what will likely to continue to be weak.

We are hearing now is it's not only that inventories are weak but it's also the selection of models.

Dealers prioritizing the more luxury higher cost vehicles which ultimately meant the more affordable entry-level vehicles were in short supply in an environment where inflation and high interest rates are certainly rising to a degree that we have not seen in multiple decades.

Those cars will be more sought after. So it will take some time to really kind of normalized the market but I think we are starting to see some signs that that's underway.

> There's a push in my household to get a new car. And I say there are no new cars.

Let's get to another question from the audience. How much of a risk is the debt ceiling south of the border to economic growth? Of course we have all that intrigue in Washington.

>> Yeah I think this is kind of the wildcard right now.

We take a step back and we see what's happened over the last couple weeks and in order for Kevin McCarthy to really get the votes that he required to gain that speakership position, he had to make some concessions to the Republicans holding out and one was increasing the debt ceiling with a reduction in spending. We've already heard from the Democrats that they will not be entertaining any negotiations that ties the debt to cut suspending so that puts aesthetic gridlock right out of the gate. The plot thickened last week when Janet Yellen Rd.

, Congress and said that by the end of this week the US will be hitting the dept ceiling and they will have to take extraordinary measures and push the timeline.

So at this point we are at a bit of an impasse. I think what is certainly being talked about right now is that Republicans might be willing to entertain abridged solution where they guarantee that they will continue to fund outstanding debt and there will not be any cuts or payments to Social Security, Medicare will continue to be made but that will come at the expense of may be cutting spending to things like noncritical defence measures.

Again this is kind of a bridge to get to a point where they can agree on what can be required to increase the debt ceiling. So there's a lot of uncertainty right now.

I think the pandemic, there was a delay where the debt was put aside or suspended temporarily. We forgot how often these negotiations happen.

How tumultuous they can become sometimes. You know, if you look back to 2011, the situation was pretty dire the situation wasn't resolved until the 11th hour. We see movement in financial markets. Sold off by over 10% for example… Certainly that's not inconceivable in this environment either if they really kind of take things to the 11th hour again.

I think what is different in this particular cycle is that the economy is probably on a more precarious footing. So we see a meaningful increase in risk premium and longer-term yield, that can certainly have a more dramatic impact on growth and can push the US economy into a recession.

>> A lot at stake there. We'll have to keep an eye on that one. Let's get to a question now.

Some from our conversation off the top. What's the state of the American consumer right now?

>> Yeah likely set at the top, things to look pretty healthy. From the standpoint of looking into last year.

Where we are spending but it's still coming in quite strong.

The one interesting element through last year, the normalization of good suspending. Consumers are definitely prioritizing more services related expenditures. It's unclear whether or not that's a result of rising interest rates and try to prioritize where they really want to do that spending or if it's just kind of a post pandemic shift where we saw goods and now there's just some normalization into services and that kind of normal consumer basket.

But I think overall, with giving consumers that degree of resilience right now are a few things: still sitting on an elevated level of excess savings and that dried out through last year. Certainly stronger than we previously anticipated mainly because inflation was far stronger. But also when we looked at household balance sheets. Still in a pretty good position.

The debt to income ratio today is only a couple of percentage points above where it was after the last cycle with the global financial crisis. So how schools are definitely in a position where they can comfortably deal with a bit more debt. We are seeing that kind of play out right now where households are increasingly relying on credit cards and other measures to fund purchases. So while they have room for that right now, obviously this is not sustainable in a longer-term basis.

The expectation, as rates continue to rise, that is certainly to put more downward pressure in consumer spending and the expectation should be that spending will slow into the 3% range into a more 1% as early as mid of this year.

>> We are talking about the American consumer right now. Let's juxtapose that with the Canadian consumer.

>> Often we like to think that Canada and the US are similar economies that move together but certainly this time it will be different. That same story in Canada is not necessarily true with debt to income ratios remaining low. In fact they are at an all-time high.

We've already seen this play out with interest ^..

.

¸we are seeing a lot more of these here in Canada compared to the US. So that is certainly going to slow consumer spending disproportionately in Canada relative to the US. And I think the other major driver in the story as well is just the renewal risk that Canadians are facing.

The mortgage structuring in Canada is different than US. Most homeowners… A much higher interest rate than what they would've anticipated wares in the US at the different story. That 30 year fixed mortgage is their product and that has helped households stay somewhat insulated. At least homeowners from rising interest rates. So that just means Canadians in a disproportionately have to dedicate more of their income into servicing that existing debt which just means less at the end of the day for discretionary spending.

So spending in the US for consumers could average to one of the half to 1%, similar in that range for this year.

Canada is likely to be about half of that.

>> Fascinating stuff as always.

Make sure you do your own research at home before making investment decisions. We will get back to your questions for Thomas Feltmate in just a moment's time.

A reminder that you can get in touch with us anytime by emailing moneytalklive@td.com.

And now our educational segment.

Dividend reinvestment plans are a wealth building strategy investors may consider.

For more on how they work and how you can set them up on WebBroker, we are joined by Bryan Rogers, Senior Client Education Instructor at TD Direct Investing.

Bryan explained was how these drips work.

>> All right. Thanks Greg we know a lot of investors should have dividends on every stock, usually a quarterly basis… As a long-term holding, consistently paying for dividends will result in periodic cash deposits and although that's a great thing, a great problem to have you will end up running into a situation where those build up in your wondering "what I do with this now with these months that have built up?" There is a service that solves that problem by allowing the investors to automatically reinvest that cash but when you receive both dividends, you can reinvest them into the stock with no Commission.

No transaction cost.

So the first step is you want to identify the stock.

Let's jump into WebBroker.

I'm in a go to research and you will get this overview screen. As you scroll down you can identify and see the dividend yield on the right-hand side are here.

That's the dividend yield of 4.29% rate here.

Based on the current stock price on the dividend which is… On an annual basis which is right now $0.96 you divide that it pays quarterly. If you want to know if there's any additional information, you can see here.

We do have some classes on that as well.

But you can jump over to the events section and then you can get, click on earnings and then click on dividends first. On the right hand side.

Click on the "dividends" tab.

Now you can see with the history what of the dividends were. You can see going back a little bit, back in 2018,… They've gone up since then.

Now you can get a good sense of what the history was of that dividend and what is it paying right now.

So you can set up the dividend reinvestment.

>> Okay let's talk about an example of how the drip program could work over the long-term.

>> Okay yes.

One thing I can't forget to mention is that this hour we do have the ability to set these up with a phone call.

So you have to do a phone call to TD Direct Investing.

Contact them and let them know that you want to set up a particular stock on dividend reinvestment or send your entire account. I would usually remake recommended that way.

You can just have your entire account and you can buy in the future and pay a dividend that will automatically be and reinvested.

Let's take a look for those who may not recognize what this is. We will jump over into the examples.

Let's go to WebBroker right here.

I'm gonna go to just as an example, you can see we have a history of TD dividends.

Here's an example we have created.

One that would have been paid in October as an example.

There should be another in January.

Going back almost 5 years, if I advance this a little bit forward you can see in 2008, that initial quarter and then you continued with 400 shares of td stock.

In that quarter, paying roughly about $0.60-$0.

67.

You can see that the dividend dollar amount right here on the right-hand side is showing the actual dollar that we would've had in cash. You can see all these other price of stock, this would have allowed you to buy part of the dividend reinvestment.

He would've been able to buy three shares.

And if I continue to go forward, I can see, I'm accumulating more shares.

It goes up and down. That's the stock going up and down.

You will end up buying more shares at a time.

And in the next one or td stock is dropped below $50, you are buying additional shares, or by 5 B, four, and then you know continuing on the last quarter we have displayed there, you can see additional shares over those five years.

In this case that dollar averaging, you are building those additional shares.

>> Interesting stuff indeed, Bryan thanks for joining us.

>> Thanks Greg.

>> Our thanks to Bryan Rogers, Senior Client Education Instructor@TD Direct Investing. Make sure to check out the Learning Center and WebBroker from Orange educational videos, live interactive master classes and upcoming webinars.

and a reminder of how you can get in touch with us.

Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live.

We are back now with Thomas Feltmate taking your questions about the economy.

We know the markets are forward-looking. When does your guest think the Fed will begin to lower interest rates?

>> So the expectation right now is in the last quarter of this year, we will likely start to see the Fed reduce interest rates probably by about 25 or 50 basis points. But that is really conditional on the fact that we see a sufficient turn and inflation and a degree of slowing in the labour market. The reality is we haven't seen that just yet. But it's gonna require some degree of slowing and underlining employment activity to generate that kind of weaker wage pressure such that its filtering in onto the inflation side of things. And that is what is more recently cut in.

Certainly our forecast believes this could happen by the end of this year but it is good to be somewhat data dependent.

>> Now in terms of a possible recession, obviously it seems that if or maybe talking about central banks, hours, the Fed, eventually cutting… A lot depending on a recession, mild, shallow or deep?

>> We did hit a recession right now, it would be more mild in thinking. One of the reasons for this is, when we look at labour market dynamics today, by all accounts we completely regained all the jobs that were lost during the pandemic.

Employment a bit … A lot of industries are well below pre-pandemic levels.

So the manufacturers are another 12. We are only now just getting back to 2019 levels. These are industries that historically have kind of lead economic downturns and of shed jobs initially out of the gate where his if we were to see a recession unfold here, these industries are unlikely to see that same degree of downturn that we have historically.

So to give you some context, if we can't go back to a postwar era and we look at all the different recessions that have occurred, absent global financial crisis, the pandemic as well, the average rate of unemployment has been about three percentage points.

Our forecast right now is increasing the unemployment rate about 1.5 percentage points. So roughly half of what we seen historically.

Going into the notion that there is still a lot of resilience and probably an argument to be made that, given the degree of labour shortages we are still seen today, employers are more likely to retain workers relative to previous cycles.

So that in and of itself should kind of stem the tide on job losses and ultimately mean just a more shallow recession.

>> Another question now:If we look between late 2021 through October the last year, we stop a mortgage rate that we saw, by 400 basis points.

Ultimately, that pushed affordability the levels that were below the lows that they reached prior to the global financial crisis. So kind of peak housing boom times. Now that led to a significant decline in sales last year. We only of the first 11 months of data but sales are down about 32%. By all accounts, we are looking at forward-looking indicators to give us an idea of where sales might be headed over the next couple of months.

Things like mortgage applications, pending home sales, all pointing to weakness over the next couple months.

So by the time it felt said and done, we could see a 35% correction in sales. What is interesting is we have not necessarily seen much movement on the price side of things.

Prices have only fallen by about 1/2%. To a large degree, what's driving that is inventories.

Particularly in the existing market which accounts for 9% of sales had remained quite low through most of the pandemic. Even over the last year. It's only been the last couple of months that we really saw inventories kind of pickup but they are basically just getting back to where they were prior to the pandemic. So this in and of itself is kind of stemming the tide to some degree in terms the price declines.

The one thing going forward to watch is going to be whether or not, because rates have fallen mortgage rates have fallen… In and of itself in short order, in an environment where there is still a demand there could put downward pressure on prices. That's kind of our expectations.

We see prices correcting by about 10% this year but we go back to 2008, 2009, prices were corrected by over 30%. A 10% correction of prices doesn't look so bad when you compare it to the pandemic where they appreciated by over 40.

>> 2008, Canada, the house we bought now was in 2007.

A little worried about the market. We didn't have the calamity of the American side.

Are they behind him at least for now?

> I think so and mortgage standards have been significantly better post global financial crisis so the mortgages that have been a far better quality today. You know, there were definitely imbalances and we were looking affordability in Canada versus the US which suggests that the Canadian market was way less affordable than the US.

So that just means there was more room for prices to evolve and that's exactly what we've seen play out.

>> Let's get the question now.

This one about the labour market.

>> >> Yeah. I think this one of those cases where what is being reported in the media might kind of exaggerate the headlines to some degree.

When we look in aggregate in terms of layoffs happening in the US, going into November, there still well below pre-pandemic levels.

Very low from historical standards. So at the aggregate level, were not necessarily seeing any large degree layoffs. Now, if we look specifically to the tech sector, things are kind of picked up there. You're starting to see a bit more movement in the data. But it's a bit more of a normalization back to 2019. Not necessarily anything that will jump off the page just yet.

It could be a good indication of where things might be headed. I mean, if we kind of do a bit of an industry analysis, we look through the last couple of years, professional business services, information, these up into areas where we've seen very strong employment growth well above pre-pandemic levels. Five, 6% above.

We've definitely seen employment right in excess I would say relative to what the overall market is dead.

Which would suggest that these industries are probably a bit more ripe for decline.

So it's hard to say at this point whether or not this is the beginning of a true softening of the labour market or just a bit of unwinding of what's built up with for the last couple of years.

>> More questions for Thomas Feltmate adjustable it's time and a reminder to do your own research before making investment decisions and you can get a touch of us any time.

do you have a question about investing? You can send us an email anytime at moneytalklive@td.

com or use the question box right below the screen here on WebBroker.

Just write in your question and hit "send".

We will see if one of our guests can get you the answer you need here at MoneyTalk Live.

>> Anthony Okolie has been digging into all of the details given the inflation print.

Anthony.

>> A small step in the right direction last month.

December CPI came in at 6.3% year-over-year.

Slightly down from the 6.8% that we saw back in November. Again, lower gas prices were really responsible for the cooling of headline inflation.

Prices at the pump last month were down more than 13% month over month. That's only 3% higher versus one year ago.

… A drop in shelter inflation. Homeowners continuing to decline in December thanks to slowing resale market.

But mortgage interest costs put upward pressure on inflation.

It was up 18% year-over-year versus the 14 1/2% that we saw back in November.

Now, durable goods prices continue to fall.

For their third consecutive month in December to 4.7% year-over-year.

As my chart shows, prices rose at a slower pace in December in five of the major categories.

That includes food, shelter and household goods like furniture and appliances.

Now the slow down and prices were driven by softer demand for one. But also easing supply chain pressures as well as lower shipping costs.

Grocery prices grew at a slight pace year-over-year.

This chart shows price growth for food was still elevated and Canadians are paying more for things like fresh vegetables including tomatoes and other fresh vegetables among rather amid unfavourable weather and regions.

But overall this was a positive report moving in the right direction.

Greg.

>> So we've been through a pretty aggressive rate hiking cycle from central banks including our own aimed at inflation. To try to bring it under control. You have this report that inflation continues to ease and now we have the Bank of Canada with the decision next week. What's the opinion from TD Economics?

>> Inflation is still elevated. Well above the Bank of Canada's target rate. TD Economics expects that the Bank of Canada will hike interest rates another quarter of a point. Keep in mind that inflation is still more cooperative in Canada versus its US counterpart. In fact, inflation is trending roughly one percentage point lower here in Canada.

Now this along with higher interest rate sensitivity in Canada should provide a lower rate for the Bank of Canada which TD Economics expects to peak at 4 1/2% in the first quarter of this year.

>> Interesting stuff as always Anthony thank you.

MoneyTalk Live's Anthony Okolie. Let's check in the markets and see if we are still holding onto our modest gains on the TSX. Indeed we are off about 40 points. We have crude oil, American benchmark about 80 bucks a barrel.

Some money moving into the energy names. Taking a look at Athabasca oil… Up one of 1/4 of a percent. Barrick Gold with some production members today and the street reacting to those.

South of the border, interesting to see where the S&P 500 is. Positive or negative right now. It is in the negative side.

Pretty modest though. Just down five points. 14 takes.

The tech heavy NASDAQ has an appetite for some of those names. Falling below the break even line as well. But very modest.

Not even six points of the downside.

The bid into Tesla, the stock has been under pressure in the past year but today it's jumping to the tune of about, let's call it 6%.

Hundred and 29 bucks and change.

We are back now with Thomas Feltmate from TD. Talking economics. We have of your question here.

>> Well I wonder if it's one catching a cold from the other or it's more the fact of central banks moving in the same direction and responding accordingly.

You know, I think our forecast shows that both economies are set after relatively strong growth in 2022 to decelerate this year and next year. This, in our view, is sufficient or necessary as a condition in order to generate disinflationary pressures to really help inflation kind of moved back towards the central bank target.

>> Know when it comes to the course the economy, maybe we will circle back to the beginning of the show. What do we really, as investors, need to be watching in the US economy to try to figure out if the Fed is winning the battle or if the Fed has to go so far into a recession?

>> I think it's the labour market at this point. It's really the indicator that we need to be watching. This comes back to that notion that service inflation shelter is really that key component that everyone's watching. So I think, you know, most economists would say that move lower inflation from today's current level, 5.7 year on year down to that 3 1/2 to 4 range, by the end of this year, is very feasible. That can happen largely through decline in energy prices and falling goods prices as we expect that will continue.

But it's that stickiness that we need to see further give.

The reality is that's not to happen until we see a cooling and labour market conditions. You know, if we kind of pull back the lens a bit and we look over last year and look at the average and growth, it had kind of steadily declined through last year. Through the last three months, an average 250,000 which is, a marked deceleration from the six thousand at the beginning of the year but still more than double what we would say trend growth in employment just to keep up with growth in the labour force. So it does kind of show you some degree of excess that we are still seeing on that. And that's coming through on the wage side of things. So really and truly it's gonna be a cooling and wage pressures such that ultimately we see that feed onto the service side of inflation.

>> The greatest threat I guess, to what the Fed or Bank of Canada or central banks are trying to accomplish year, what would be simply your knocking to get that cooling…?

>> I think that certainly a threat and we've definitely heard the Fed and of kind of acknowledge that more recently. What's interesting is when we look at the minutes from the December read announcement from the Fed, the one thing they did call it was the easing and financial market conditions that happened in the latter half of last year. It was quite explicit really, where they said the channel through which monetary policy mainly works as financial markets.

So kind of, any missed reading from financial market standpoint in terms of the Fed's reaction could force the FOMC to push even harder relative to what they've already disclosed to market where they expect things will be. So I think that's also a risk as well. Just a misinterpretation of what, a pause and rate hikes looks like and what the impact of that is versus cutting interest rates.

So there could be a bit of misconception at play as well.

Certainly a risk.

>> Very interesting 2023.

Thomas great to have you here and were looking forward to the next time.

>> Thank you Greg.

>> Thomas Feltmate, Senior Economist a TDP.

Stay tuned on Wednesday, Stephen Biggar, Dir.

of financial institutions research at Argus research will be our guest take your questions. A reminder you get a head start, email MoneyTalk Live NT.com. Thanks for joining us.

Take care.

[music]