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Loonie Soars On Bank Of Canada Rate Announcement

07 September, 2017, 01:34 | Author: Priscilla Morrison
  • RBC CEO Dave Mc Kay said the interest rate hike should benefit the bank’s retail franchise by roughly $100 million in revenue in the first year

The Bank of Canada increased its key lending rate by 0.25 percentage points to 1.0 percent Wednesday as the economy roars back to life.

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

"The future decisions in monetary policy are not predetermined and will be guided by new economic data and developments in financial markets", stressed on Wednesday the central bank.

"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", the bank said.

With the Bank of Canada meeting later on this week, it is an exciting time for CAD bulls who have seen their outlook strongly confirmed by a stunning GDP figure in the most recent release which has appeared to fully condone the decision of the BoC to move towards a more hawkish policy.

Canada's currency climbed as much as 1.8 per cent after the decision, reaching $C1.2146 against its USA counterpart, the highest intraday level since June 2015, and extending the gain this year to 10 per cent.

The Bank said that given the stronger-than-expected economic performance, their increase today is "warranted".




Canada's central bank has hiked the target for the overnight rate, which influences the mortgage market, by 25 basis points to 1 per cent.

Launched on July 1, 2016, Daily Hive is the evolution of Vancity Buzz and is now in Vancouver, Calgary, Toronto, and Montreal.

"The Bank made very little attempt to push back against the strength of the Canadian dollar and also very little attempt to suggest that this is merely (removing) two insurance cuts and then we are on hold for a while", said Bipan Rai, senior macro strategist at CIBC Capital Markets, referring to a pair of 2015 rate cuts meant to combat the effect of plunging oil prices.

Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. The Canadian Dollar has also further benefitted against the US Dollar following US Federal Reserve Vice President Fischer's decision to step down due to personal reasons.

Wednesday marks the bank's second consecutive rate hike. Nonetheless, there remains some excess capacity in Canada's labour market, and wage and price pressures are still more subdued than historical relationships would suggest, as observed in some other advanced economies.

It pledged to pay particular attention paid to the economy's potential, job-market conditions and any potential risks for Canadians from the higher costs of borrowing. It said the Canadian dollar has appreciated - roughly 10% in past three months - and that reflected both domestic strength and weakness in the US currency amid "significant geopolitical risks and uncertainties around" the renegotiation of the North American Free-Trade Agreement, and USA fiscal policy.

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