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This week the Federal Reserve's Open Market Committee meets. And once again, the watchers will be parsing every word in the statement (to be released at 1:15 p.m. on Wednesday April 25) for a hint on central bank's next move.
Most are looking for indications on whether further quantitative easing is on tap. Others, however, are looking for clues as to when the Fed's economic outlook will be strong enough to result in a more sustained increase in bond market interest rates.
On Friday, we spoke with Dan Janis, who co-manages a $2-billion income fund for Manulife. He very succinctly summarized what clues he is looking for from the Fed to allow for a more sustained rise in interest rates.
First, he would like to see the discussion of headwinds from Europe to be toned down. Second, the term "modest" to describe improvements in the labour market should be replaced with "self-sustaining" or "stronger." And finally, he would like to see a recognition that GDP is running at a pace closer to 3 percent or better rather than the current growth rate that is below the Fed's target zone.
Once these three things are in place, then the bond market inflection will be for real, according to Janis. You can see the full interview (plus a discussion about his favourite hockey team, the Boston Bruins) in the attached video.