Loonie Soars After Bank Of Canada Unexpectedly Hikes Rates By 25 bps
With only 6 of 33 forecasters predicting a rate hike in today’s Bank of Canada announcement, it was inevitable: the Bank of Canada surprised a good 75% of the market, and triggered massive stop loss orders in the looni, when moments ago it announced it hiked rates by 25bps to 1%, sending the USDCAD lower by nearly 300 pips…
… the biggest spike in the loonie since March 2016, and the highest in two years.
According to the BOC statement, “removal of some of the considerable monetary policy stimulus in place is warranted” given stronger than expected economic performance while adding that “future monetary policy decisions are not predetermined” and will be guided by economic data and financial-market developments as they “inform the outlook for inflation.”
The Central bank also said that “close attention will be paid to the sensitivity of the economy to higher interest rates” given elevated household indebtedness. The bank will give particular focus to evolution of economy’s potential and labour market conditions, while highlighting that inflation remains below 2% but has evolved “largely as expected” since July MPR.
In the statement the central bank also highlighted that “excess capacity remains in labour market, wage and price pressures more subdued than historical relationships suggest” while “geopolitical risks and uncertainties around international trade and fiscal policies remain.”
Some analysts have highlighted that in the statement’s forward guidance, the central bank removed its inflation outlook, and replaced it with an outlook on potential output and the labor market.
Finally, the bank expects moderation of pace of economic growth in 2H 2017, but GDP level higher than expected in July MPR.
The full statement is below (link):
…click on the above link to read the rest of the article…
