Bank of Canada Lifts Rates for Second Time in 8 Weeks

The Bank of Canada again raised its key rate by 25 basis points on Wednesday, making it switch to 1 %.

The loonie soared this morning after the Bank of Canada announced an increase in its key lending rate, a move that caught some market watchers by surprise.

"While we can't rule out another rate hike before the end of this year, we should note that the economy is still overly dependent on the heavily indebted household sector to support economic growth", said David Madani, senior Canada economist at Capital Economics, in emailed comments. CAD gains can not be unlimited if Oil does not to some extent support the bullish sentiment as the Bank of Canada is still very sensitive to the broader picture for Crude Oil.

The Bank of Canada statement said future rate decisions were "not predetermined", and would be guided by incoming economic data and financial-market developments.

More news: FSU QB Deondre Francois Reportedly out for Season with Leg Injury

Since slashing rates because of the global financial crisis dubbed the Great Recession that ended in 2009, central banks have been closely watched for interest rate hikes as a signal that nations are healing from the financial collapse almost a decade ago.

In a statement, the Bank of Canada noted that consumer spending remains robust, "underpinned by continued solid employment and income growth". Two rate hikes in a row after such a sustained period of none is a bold move and traders may now be expecting more in the months ahead.

"It didn't say that the current level of stimulus is now 'appropriate, ' which has been a phrase used in the past and would have been a way of signaling a pause in hikes from here", Andrew Grantham, an economist with Canadian Imperial Bank of Commerce, said in a note to investors.

This marks the second straight meeting at which Canada's central bank increased its main interest rate, which has been on hold for seven years, and unwinds the two rate cuts it delivered in 2015 to deal with negative fallout from the commodity-price swoon.

More news: Canadian economic growth 'gangbusters' in second quarter thanks to consumers

The welcome economic update, however, means higher interest rates - already expected based on past statements from the Bank of Canada - will likely be coming sooner rather than later.

The Canadian dollar gained more than a penny in reaction to the news on Wednesday, and was changing hands at 82 US cents, the highest level since June 2015. In this context, the Canadian dollar has appreciated, also reflecting the relative strength of Canada's economy.

At this meeting, there was no new Monetary Policy Report (MPR) and Governor Poloz will not be holding a press conference.

The rest of the statement has a hawkish tone and is optimistic on growth, while at the same time mentioning the geopolitical risks (and uncertainty about global trade).

More news: Ward Features Trump Attacks in New Ad Against Flake


Popular
  • Major Gas Price Spikes Headed Canada's Way

    Major Gas Price Spikes Headed Canada's Way

    Prices are expected to remain high until refineries resume normal operation, the timing of which is still unknown. In Western Canada, prices also leapt based on oil trading in Chicago, said Mr.
    Bruce Springsteen extends his Broadway concerts

    Bruce Springsteen extends his Broadway concerts

    Ticket resellers often use such software to buy tickets to popular shows and concerts en masse, then resell them at a premium. Tickets will go on sale September 7.
    Myanmar receives Kofi Annan report on Rakhine situation

    Myanmar receives Kofi Annan report on Rakhine situation

    Myanmar says the group is headed by Rohingya jihadists who were trained overseas but it is unclear how large the network is. Rakhine is a site of frequent clashes between Myanmar's Muslims and Buddhists.
  • Russian Federation  2018: Nigeria's Super Eagles shock Cameroon's Indomitable Lions

    Russian Federation 2018: Nigeria's Super Eagles shock Cameroon's Indomitable Lions

    Rohr, speaking after the match, said he is happy his team did not let Ikeme down. They face Cameroon again at Yaounde on Monday in matchday 4 encounter.
    PA guard deploys 10 soldiers to assist with Harvey relief efforts

    PA guard deploys 10 soldiers to assist with Harvey relief efforts

    The National Guard took over a private airport in Brookshire, where they are preparing 8,000 pounds of supplies. Hapgood says it's not the first time Iowa soldiers have been called on following a major storm.
    Steve O'Keefe joins Australia for second Test in Chittagong

    Steve O'Keefe joins Australia for second Test in Chittagong

    Shakib removed Glenn Maxwell, who was considered the only final difficulty. "We got eight wickets, the fielders too chipped in". The tourists' sole warm-up match before the Test was cancelled. "Against England also we beat them in the second game".
  • Kim Kardashian was Taylor Swift's biggest fan, apparently

    Kim Kardashian was Taylor Swift's biggest fan, apparently

    Swift's team claimed after "Famous" came out that the singer did not approve the lewd lyrics, while West insisted she did. In this scene from " Look What You Made Me Do " Taylor resides in a bath and is surrounded by diamonds.
    Man United target Premier League winger

    Man United target Premier League winger

    "The initial period is very important to get to know the club and everything around it, all the players, coaches and the system". Everybody talks about the big stars, but four of United's ten goals this season, almost half, have come from substitutes.
    Excessive heat warning issued

    Excessive heat warning issued

    The Antelope Valley and other inland valleys are expected to face the worst heat this week, with triple-digit temperatures. The Weather Service cautions that elderly, youth, and those without air conditioning will be vulnerable to the heat.
  • Thousand of People Attend Peace March After Terror Attack in Barcelona

    Thousand of People Attend Peace March After Terror Attack in Barcelona

    The five occupants of the Audi A3 jumped out and went on a stabbing spree, killing a woman, before they were shot dead by police. People also carried red, white and yellow roses to signify the colors of Barcelona , the second-largest city in Spain .

    Kushner Visit to Middle East to Bringing Peace between Israel and Palestine

    Even before the meetingŲŒ PA officials expressed pessimism that Washington's peace efforts could bear fruit. They have also held talks with Egyptian, Saudi, Emirati, Qatari and Jordanian officials.
    Samsung leader found guilty of bribery and embezzlement

    Samsung leader found guilty of bribery and embezzlement

    The 49 year-old heir was accused of offering bribes to four entities controlled by Choi Soon-sil worth $38m, denied all charges. Nevertheless, the verdict is one of the heaviest ever to be handed out to the head of a major chaebol in South Korea.

CONNECT