The Globe and Mail reports in its Wednesday edition that with last week's interest rate
hike, the Bank of Canada
has returned the overnight rate
to 1 per cent. The Globe's guest columnist Craig Alexander calls this decision sensible, because it
removes the additional monetary
stimulus provided in the
wake of the commodity price
downturn 2-1/2 years ago. The economy is set to
grow by close to 3 per cent this
year. The
pace of growth is rapidly eating
up the slack in the economy.
The key question is whether
the BOC needs to hike
rates further. The Conference
Board of Canada believes
continued growth in the economy
will eventually warrant further
tightening by the end of
2018, but there is no urgency to
continue hiking at the next
announcement on Oct. 25.
Markets are pricing in a good
chance of a further tightening in
October. This reflects the
strength in the economy, but
also the fact that this decision
day is accompanied by an
updated economic forecast and
a press conference that would
allow the bank to fully articulate
its views. The BOC's Sept. 6 announcement
said that the latest policy
tightening only reduced, "some
of the considerable monetary
policy stimulus in place."
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