Holders of variable-rate mortgages can expect to see their mortgage rates rise immediately, as happened last summer when the Bank of Canada last hiked interest rates. To traders, investors, and Canadians, this decision will be vital.
"Our base case of a rate hike may offer a knee-jerk boost to CAD but rich valuations, stretched positioning, and looming NAFTA risks favour buying into USDCAD dips near the recent lows". Developments in Poloz's list of areas to watch, including interest rate sensitivity, labour market developments, and inflation dynamics could easily bring the next hike forward, or push it back.
The last time the target for the overnight rate was higher than 1 percent was nine years ago (1.5 percent) before the BoC started cutting rates as the 2009 recession took hold.
In the January 2015 meeting, the committee lowered rates to 0.75% amid rising inflation.
The fund said banks coordinated false CDOR submissions after their CDOR-based derivatives portfolios, on which they made interest payments, had grown far larger than their CDOR-based loan portfolios, on which they collected interest.
The claim alleges the banks manipulated the Canadian dealer offered rate - which reflects what rate contributors are willing to lend to corporate clients using an instrument called a bankers' acceptance - from at least August 9, 2007, to June 30, 2014. A 25bp rate hike to 1.25% today is fully priced in by the market. However, there is a problem. The bank pointed out that roughly half of Canada's exports to the United States benefited from preferential NAFTA tariffs in 2016. The deal has been so important to the three countries such that an exit would lead to significant consequences.
The price of oil, one of Canada's major exports, hovered near a three-year high on signs that production cuts by OPEC and Russian Federation are tightening supplies.
The Bank of Canada's Monetary Policy Committee will most definitely think about this in their meeting.
Speculators have raised bullish bets on the Canadian dollar for the first time in three weeks, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. Most explicit was the statement that while the outlook will likely "warrant higher interest rates over time, some continued monetary policy accommodation will likely be needed". The economy is now doing well, boosted by high commodity prices. Couple this with a weaker dollar. It predicted Canada's high levels of household debt would amplify the effects of higher interest rates on consumption. Also, while the unemployment rate has declined in the past few months, the wage growth problem continues to persist.
As such, the rate of delinquencies is increasing and most Canadians fear that personal bankruptcies might be looming.