Both central banks are weighing a move this month
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The potential for a second interest rate hike by the Bank of Canada could become reality this week but it will mean a careful balancing act for Governor Stephen Poloz.
As Canada’s central bank prepares to meet Wednesday, there is also careful consideration south of the border as to the timing of the Federal Reserve’s next rate rise.
The bulk of opinion remains against an increase to 1% from the BoC this month but the strength of the Canadian economy may prompt the bank to act sooner than the popular forecast of October.
“There definitely is a real chance the Bank of Canada could hike rates again [this month]. In fact, market pricing gives it almost a 40% chance,” said BMO chief economist Douglas Porter.
Challenges could be created by an early rate hike, including further upward pressure on the Canadian dollar, already elevated as the greenback has weakened.
Governor Poloz may prefer to await the September decision of the Fed which is two weeks away.
Fed chair Janet Yellen has her own balancing act.
With strong US growth in the US economy (although likely to be impacted by Hurricane Harvey for the current quarter) and a falling jobless rate, the conditions appear good.
But the potential for a government shut down and continued political unrest both at home and internationally are in focus.
Markets are also awaiting the scaling back of the Fed’s balance sheet which is expected to begin in the coming months.
As Canada’s central bank prepares to meet Wednesday, there is also careful consideration south of the border as to the timing of the Federal Reserve’s next rate rise.
The bulk of opinion remains against an increase to 1% from the BoC this month but the strength of the Canadian economy may prompt the bank to act sooner than the popular forecast of October.
“There definitely is a real chance the Bank of Canada could hike rates again [this month]. In fact, market pricing gives it almost a 40% chance,” said BMO chief economist Douglas Porter.
Challenges could be created by an early rate hike, including further upward pressure on the Canadian dollar, already elevated as the greenback has weakened.
Governor Poloz may prefer to await the September decision of the Fed which is two weeks away.
Fed chair Janet Yellen has her own balancing act.
With strong US growth in the US economy (although likely to be impacted by Hurricane Harvey for the current quarter) and a falling jobless rate, the conditions appear good.
But the potential for a government shut down and continued political unrest both at home and internationally are in focus.
Markets are also awaiting the scaling back of the Fed’s balance sheet which is expected to begin in the coming months.
