As Expected, Bank Of Canada Hike Interest Rate

As Canada celebrates its 150th birthday the economy is strengthening

I would have to think that insofar as the Bank was willing to move today without a hike fully priced in (less than 50-per-cent odds were discounted yesterday), and with Fed rate-hike odds nearly vanishing for this year, the loonie's strength, the GTA housing market rolling over, and inflation below-target, the bar is low for the Bank of Canada to move again.

Higher interest rates offer lenders in a given economy a better rate of return compared to other jurisdictions.

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

The Canadian dollar continued its upward climb on the news, trading up around 81.8 US cents to gain about 1.2% on the day and 1.6% already this week.

The yield on 2-year government debt jumped as much as 10 basis points to its highest since April 2012 at 1.450 percent.

The hike comes after an initial raise in July, which was the first in seven years. He changed his forecast last week to correctly predict therate increase. Most economists also expected the BOC to show some patience and instead hike in October.

The rate hike seemed to unsettle those holding shares of the country's banks, whose earnings growth depends in part on homebuyers taking out more loans. Traders had assigned about a 40 percent chance of an increase.

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The canadian banks have immediately reacted to the announcement. "It was a fairly hawkish move and statement today".

That followed unexpectedly healthy growth in the first three months of 2017 and exceeded the Bank of Canada's projections.

TD CEO Bharat Masrani told the conference that rising interest rates are a "positive phenomenon" for the financial institution.

"Given the stronger-than-expected economic performance, [the bank] judges that the removal of some of the considerable monetary policy stimulus is warranted". 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.

Recent economic data have been stronger than expected, supporting the Bank's view that growth in Canada is becoming more broadly-based and self-sustaining. Nevertheless, there is still some slack in the labour market while wage and price pressures are still more subdued tan historical relationships would suggest. He may also be attempting to restrain market expectations it will get too far ahead of the Federal Reserve.

When it comes to trade with the US, newly elected American President Donald Trump has threatened to tear up the North American Free Trade Agreement, with his administration already taking steps to make it more expensive for Canadian softwood lumber to enter the USA markets.

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