Published: Wed, July 11, 2018
Money | By Ralph Mccoy

'There are worries ahead': Experts react to Bank of Canada's rate hike

'There are worries ahead': Experts react to Bank of Canada's rate hike

The Royal Bank of Canada said Wednesday it will increase its prime rate by a quarter of a percentage point to 3.70 per cent, effective Thursday.

"This U.S. dollar move offsets, and even more so, the somewhat hawkish BoC hike", said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in NY.

Governor Stephen Poloz said that while it was not easy for policymakers to set aside "all the talk" about trade, the bank hiked rates amid increasing confidence in its outlook, with Canada's economy firing on all cylinders despite the tensions.

The Canadian dollar weakened to a more than one-week low against its US counterpart on Wednesday as broad-based gains for the greenback offset an interest rate hike by the Bank of Canada and the prospect of further monetary policy tightening. Yet, the Canadian dollar is lower, reflecting broad-based United States dollar strength and concerns about trade actions.

Federer shocked by Anderson in Wimbledon quarters epic
Now the 32-year-old South African moves on to a semifinal against No. 9 John Isner of the US or No. 13 Milos Raonic of Canada. "Beating Roger Federer at Wimbledon is definitely one I'm going to remember". "I kept telling myself to keep believing".

Andriy Yarmolenko: West Ham sign Ukraine global winger from Borussia Dortmund
West Ham hope to follow the signing with the £40m capture of Lazio midfielder Felipe Anderson . Yarmolenko, 28, has joined in a £17.5m switch from Bundesliga outfit Borussia Dortmund .

Next Mavic Pro could offer swappable cameras and safer flight
Just a few days ago, a leaked photo stirred excitement among drone fans as it is the first credible image of the upcoming release. It also looks like the drone might have 360-degree obstacle avoidance, which could be a big deal depending on the software.

Poloz also signaled he was comfortable with how financial markets were interpreting the central bank's message, noting the hike was "highly anticipated".

The country's inflation rate is expected to rise as high as 2.5% - above the 2% mid-point of the bank's target range - due to temporary factors such as higher gasoline prices. Business investment is growing in response to solid demand growth and capacity pressures, although trade tensions are weighing on investment in some sectors.

However, the negative blow of the trade policies recently put in place are to be largely offset by the positives for Canada from higher oil prices, which are above US$73 per barrel, and the stronger USA economy, the bank said.

"Despite hiking rates today, the Bank of Canada is in no rush to continue pushing rates higher given the uncertainties surrounding trade, lingering concerns about housing and household debt, and renewed belief that there's some labour market slack". It's expected to settle back down to 2% in the second half of 2019.

Like this: