Breaking News
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Canada: Expect A Rate Rise, But The BoC’s Treading Carefully

By ING Economic and Financial Analysis (James Knightley)Market OverviewJul 10, 2018 07:30
ca.investing.com/analysis/canada-expect-a-rate-rise-but-the-bocs-treading-carefully-200197281
Canada: Expect A Rate Rise, But The BoC’s Treading Carefully
By ING Economic and Financial Analysis (James Knightley)   |  Jul 10, 2018 07:30
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

After a six month hiatus, the Bank of Canada looks set to hike interest rates again this week, but future policy moves will largely be determined by the prospect for a deal on U.S.-Canada trade

What we're expecting

After experiencing a surprise burst of growth in 2017, economic activity has lost a little momentum in 2018. Part of this can be attributed to rising trade tensions that have seen businesses becoming more wary about putting money to work in the economy. Both capital investment and hiring have slowed and we've also seen consumer spending growth moderate. However, this has to be put in context. Last year the economy grew by more than 3% and even with the slowdown we're currently seeing, the economy is set to grow by more than 2% in 2018.

At the same time inflation is broadly in line with the Bank of Canada’s 2% target and this supports the notion that the economy is performing close to capacity. Wage growth has also accelerated so there is a sense that the BoC runs the risk of falling behind the curve. As a result, we see financial markets pricing in nearly a 90% chance of a 25bp hike on Wednesday, while 16 out of 21 economists surveyed by Bloomberg look for such a move. We agree and also anticipate a 25bp move.

Average Hourly Earnings
Average Hourly Earnings

Trade tensions are a concern

Further policy moves are likely to be contingent on whether the current storm surrounding U.S. President Donald Trump’s trade rhetoric calms down. The imposition of tariffs has seemingly had only a modest direct impact on the economy so far, with it being more of a drag on sentiment. However, remember that the $545 billion of cross-border trade Canada conducts with the U.S. means any escalation of protectionist policies could have very important ramifications. Indeed, Canadian exports to the U.S. are equivalent to 17% of Canadian GDP.

Trump has suggested pushing NAFTA negotiations further down the line until after the U.S. mid-term elections in November, which will prolong Canada’s trade uncertainties. However, the U.S. economy is roaring ahead, and while the trade situation remains largely unchanged, this poses major opportunities for Canadian exporters. As such we are still anticipating another rate rise before the end of the year from the Bank of Canada. That said, should more tariffs suddenly be applied the probability of such a move will wane.

Content Disclaimer: The information in the publication is not an investment recommendation and it is not an investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.

This publication has been prepared by ING solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. For our full disclaimer please click here.

Original post

Canada: Expect A Rate Rise, But The BoC’s Treading Carefully
 

Related Articles

FactSet Research Systems Inc
Podcast: Evergrande, US Futures, Central Banks in Focus By FactSet Research Systems Inc - Sep 23, 2021

US futures are indicating a higher open as of 05:00 ET. Central banks in focus with Norges Bank, SNB, and BoE policy announcements this morning, following the FOMC announcement...

Canada: Expect A Rate Rise, But The BoC’s Treading Carefully

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email