Full text of the Bank of Canada decision

07 September, 2017, 01:49 | Author: Ora Austin
  • A new subdivision rises in Kleinburg Ont. this year. A rate rise this week would likely make floating-rate mortgages rise almost immediately though stress test rules may blunt the effect on the wider market

Some financial prognosticators say the central bank could raise the overnight rate - upon which banks base their own lending rates - from.75 to 1.0 per cent as early as this week.

That figure could "increase to upwards of $300 million in year five as it takes a while to blend into the portfolio, as we roll off assets, and we refinance assets at the higher rate..."

The majority of economists surveyed by Bloomberg forecast that the central bank would hold at this meeting.

The Bank of Canada have made it clear that any future interest rate decision will be made exclusively on economic data releases, and as such have not given any further signals to monetary policy decisions.

Canada's central bank in July raised its benchmark interest rate by a quarter-percentage point to 0.75%, the first increase since 2010, on the view the economy was approaching full capacity as growth was broadening.

In a statement, the Bank of Canada noted that consumer spending remains robust, "underpinned by continued solid employment and income growth". There has also been more widespread strength in business investment and in exports.

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The Bank of Canada surprised many when it hiked rates and left the door open to more rate increases in 2017 even as it pledged to pay attention to how higher borrowing costs would hit Canada's indebted households.

Canada's currency climbed as much as 1.8 per cent after the decision, reaching $C1.2146 against its United States counterpart, the highest intraday level since June 2015, and extending the gain this year to 10 per cent. That would typically be a strong signal to policy makers that interest rates need to rise.

Nevertheless, BoC said that while removing some of the "considerable" monetary stimulus that was in place was "warranted", further policy decisions were not "predetermined".

Toronto-Dominion Bank's CEO Bharat Masrani also said rising rates would be good for his bank, Canada's second-biggest lender, as long as they proceed at a moderate pace. However, significant geopolitical risks and uncertainties around global trade and fiscal policies remain, leading to a weaker USA dollar against many major currencies. There was no Monetary Policy Report or news conference to explain a move higher.

As is often the verbiage of central banks, no future moves are set in stone, as they will be determined by analysis of economic data and other developments.

"There remains some excess capacity in Canada's labour market, and wage and price pressures are still more subdued than historical relationship would suggest", according to the statement.

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