Bank of Canada raises rate, predicts economic resilience despite trade risks

Daniel Fowler
July 13, 2018

"Canada's economy continues to operate close to its capacity and the composition of growth is shifting", said the BOC.

Looking ahead, the Bank of Canada is also predicting exports and business investment, which were both stronger than expected in the first three months of the year, to churn out bigger contributions to growth.

However Poloz said the bank can not make policy on the basis of hypothetical scenarios.

Canadian businesses must also contend with the uncertainty surrounding the hard renegotiation of the North American Free Trade Agreement, for which talks have stalled. According to ratehub.ca, a mortgage worth $400,000 amortized over 25 years with a 5-year variable rate of 2.50 per cent, will now cost $50 per month or $600 per year.

The Credit Counselling Society's president and CEO says a rate hike is positive for those with funds in a savings account, particularly seniors who depend on interest income to help cover their expenses.

"We need to base our decision on what we actually know", he said.

Netflix Topples HBO in Emmy Nominations
Others in the category include "black'ish", "Silicon Valley ", " Curb Your Enthusiasm " and " Unbreakable Kimmy Schmidt ". She earned a nomination herself for Outstanding Supporting Actress in a Drama Series previous year .

In addition to tariffs, Canadian businesses must also contend with the uncertainty surrounding the stalled talks on NAFTA's renegotiation.

The Bank of Canada also has its eye on how widening global trade disputes, including an intensifying battle between the USA and China, will affect the world's economy.

The Bank expects the global economy to grow by about 3 ¾ per cent in 2018 and 3 ½ per cent in 2019, in line with the April Monetary Policy Report (MPR).

"The Bank maintained a cautious tone while highlighting its data dependency, that said, this was not the "dovish" hike many, including ourselves, expected".

As widely anticipated by economists, the Bank of Canada raised its trend-setting policy rate to 1.5 per cent, up from 1.25 per cent on Wednesday. The Bank estimates that underlying wage growth is running at about 2.3 per cent, slower than would be expected in a labour market with no slack. Inflation ran at a 2.2-per-cent pace in May, slightly above the Bank's target of 2 per cent. It's expected to settle back down to two per cent in the second half of 2019.

Other reports by

Discuss This Article

FOLLOW OUR NEWSPAPER