KEY RATE INCREASE IN CANADA
As analysts and investors had anticipated, excellent Canadian economic indicators forced the Bank of Canada’s hand, as it raised its key rate to 1.25% yesterday morning.
A few key points from the statement and press conference:
-Positive: The BoC acknowledged strong economic indicators (jobs, growth, etc.)
-Positive: Growth forecasts for 2018 and 2019 were boosted
-Negative: NAFTA could significantly harm foreign trade
-Negative: Inflation is rising again, but uncertainty remains
After the rate decision, the Canadian dollar went on a roller coaster ride against the U.S. dollar before stabilizing. The Toronto Stock Exchange reacted positively to the news, gaining 0.17%.
What comes next? According to our economists, the BoC should take a step back before raising its key rate again. The target date is May 30. Our economists still expect three further rate hikes by the end of the year, while markets are only calling for two. If their expectations materialize, we could see the loonie gain ground and interest rates climb.
Julien Duquette
Range of the day: 1.2390 – 1.2485