The Bank of Canada decided to hike the overnight interest rate to 1.75% saying higher rates will be needed to achieve the inflation target while dropped the previous language about gradual rate hikes. The Canadian Dollar rose 100 pips to C$1.3000 in a knee-jerk reaction to the move with the Bank of Canada sounding very optimistic about the growth outlook.
The Bank of Canada hiked interest rates by a quarter point yesterday. This brought the interest rates to 1.75%, the highest in a decade. The central bank also took a more hawkish stance indicating that rates might have to rise faster than expected.
At today’s meeting, the Bank of Canada raised the key rate to 1.75%. According to National Bank of Canada’s analysts, Krishen Rangasamy and Paul-André Pinsonnault, the central bank opened doors for faster policy normalization.
The Bank of Canada hiked the Overnight Rate from 1.25% to 1.50%. They cited a growing economy, a housing market that has stabilized and an upbeat forecast for inflation which is projected to rise to target by the second half of 2019. Most importantly, the Ottawa based institution maintained its bullish bias by saying that "expects that higher interest rates will be warranted to keep inflation near target" in the last paragraph of the statement. The approach will remain gradual and the BOC stated itis data dependent, but that is not news.
The Bank of Canada maintained a cautious tone while highlighting its data dependency, that said, this was not the ‘dovish’ hike many, including ourselves, expected. Headline data may be relatively upbeat but a scratch below the surface unveils a very different picture with consumers being squeezed by higher debt servicing costs and rising cost-push inflation, while we see the outlook for trade and investment as uncertain at best.
For a fourth time in the past year, the BoC hiked rates 25 bps, bringing the overnight lending rate to 1.50 percent. Markets widely expected the move, given firming inflation and other signs of an economy close to capacity. Core measures of inflation are near the middle of the BoC’s target range and headed higher. A weaker Canadian dollar, which has fallen in the wake of trade concerns, and new tariffs on U.S. imports will add upward pressure to inflation, along with growing capacity constraints.
The Bank of Canada is the nation's central bank. Its principal role is "to promote the economic and financial welfare of Canada," as defined in the Bank of Canada Act. The Bank’s four main areas of responsibility are:
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Stephen S. Poloz was born in Oshawa, Ontario, in 1956. He was appointed Governor of the Bank of Canada, effective 3 June 2013, for a term of seven years. He is the ninth Governor of the Bank of Canada. As Governor, he is also Chairman of the Board of Directors of the Bank and a member of the Board of Directors of the Bank for International Settlements (BIS). He currently chairs both the BIS Audit Committee and the Consultative Council for the Americas.
The World Interest Rates Table reflects the current interest rates of the main countries around the world, set by their respective Central Banks. Rates typically reflect the health of individual economies, as in a perfect scenario, Central Banks tend to rise rates when the economy is growing and therefore instigate inflation.
