Report: Expectations from BoC Rate Statement on Wednesday October 25th

October 24, 2017

A view on October's interest rates.

Report: Expectations from BoC Rate Statement on Wednesday October 25th

This article is originally referred from FXPrimus Official Website

The Bank of Canada raised its interest rates by 25bp back in September 6th following a 25bp rate hike in July 12.

The rate hike took Loonie 82 cents higher versus the Dollar while economists were expecting another raise in the upcoming October 25th economic event, rather than as early as July.

BoC raised interest rates from 0.5% to 0.75% in July for the first time in 7 years, and set a record by raising rates to 1.0% again in September.

An accelerated economic growth of 4.5% YoY in Q2 and the best economic performance amongst G7 countries was supported by an expansion mainly in Exports and the Energy sectors.

Despite some analysts did see the second rate hike as aggressive the data were encouraging and BoC’s stance on policy seems to be pretty stimulative, albeit, inflation lingered below the 2.0% target, but is currently slightly improved.

Canada’s Inflation is at 1.43%, compared to 1.13% last year. This is lower than the long-term average of 3.89%, although, lower than the 1.50% expectation.

While inflation raised the Change in Real GDP also raised some 20bp, compared to 0.90% last quarter and -0.30% last year, which is higher than the long-term average of 0.59%.

With the Housing market starting to cool off from high debt, revisions on tax policies, housing policies evolving and the CPI tilting 0.2% higher in August, BoC’s decision on the 25th may depend on the upbeat view on growth and the performance of the Canadian Dollar.

However, the labor market conditions, the economy’s potential and whether it can withstand another rate hike for the year, signal that the current level of stimulus may be most appropriate for now.

Original Source: FXPrimus Official Website

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