The world economy continued to grow in 2006, defying monetary policy tightening and higher energy prices. Federal Reserve Chair Ben Bernanke declared a ceasefire on increases in the Fed Rate in June and waited for the U.S. economy to slow. The financial markets took this as the all clear signal for this monetary cycle and began to anticipate a drop in interest rates. This caused the previously faltering stock and bond markets to rally strongly in the final 6 months of 2006.
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Canso February 2007 Market Observer
