In a widely expected decision, the Bank of Canada (BOC) announced that it increased its target for the overnight rate to 1.25%. The Bank Rate is correspondingly 1.5% and the deposit rate is 1%. Governor Stephen Poloz is expected to give his remarks on the monetary policy implementation at 16:15 GMT. Below are the key highlights from the official statement.
Recent data have been strong, inflation is close to target, and the economy is operating roughly at capacity.
However, uncertainty surrounding the future of the North American Free Trade Agreement (NAFTA) is clouding the economic outlook.
Global commodity prices are higher, although the benefits to Canada are being diluted by wider spreads between benchmark world and Canadian oil prices.
In Canada, real GDP growth is expected to slow to 2.2 per cent in 2018 and 1.6 per cent in 2019, following an estimated 3.0 per cent in 2017.
The Bank continues to monitor the extent to which strong demand is boosting potential, creating room for more non-inflationary expansion.
The Bank expects CPI inflation to fluctuate in the months ahead as various temporary factors (including gasoline and electricity prices) unwind.
While the economic outlook is expected to warrant higher interest rates over time, some continued monetary policy accommodation will likely be needed to keep the economy operating close to potential and inflation on target.
Key notes
The real focus is on the Bank of Canada - BBH.
Global Currency Strategy Team at Brown Brothers Harriman & Co. (BBH) provides a brief overview for the upcoming BOC monetary policy decision, due to be announced later during the NA session.
CAD: Data warrants a Bank of Canada rate hike today, NAFTA risks may not - ING.
According to Viraj Patel, Foreign Exchange Strategist at ING, the Bank of Canada is set to hike rates by 25 basis points today but the real driver will be the central bank's assessment for the economic outlook amid growing concerns over the future of the NAFTA free trade agreement.
About Stephen Poloz
"Stephen S. Poloz was appointed Governor of the Bank of Canada, effective 3 June 2013, for a term of seven years. 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," as published on bankofcanada.ca.
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