Canada's key rate rises
A five-month pause in interest rate rises came to an end in Ottawa with Canadian policymakers lifting the overnight rate target by a quarter point to 4.75 per cent.The yield on Canada’s 10-year note leapt 17 basis points to 3.45 per cent near 2pm Eastern Time.“Globally, consumer price inflation is coming down, largely reflecting lower energy prices compared to a year ago, but underlying inflation remains stubbornly high.
Scotiabank’s Derek Holt said: “I think the BoC did the right thing and hats off to the governor and Governing Council for doing what’s necessary.”“My reading of the statement leaves the door open to doing another 25bps in July, but it’s going to be a data dependent call,” Mr Holt also said. “Today’s hike gives them more optionality to decide what to do before going on vacation in August.”
TD said it is not convinced that the latest quarter point move “will be enough to bring the economy back into balance and continue to look for another rate hike in July for a 5.00 per cent terminal rate”. “On inflation, while the headline rate is still expected to hit 3 per cent this [Canadian] summer, the focus is on core inflation which continues to make policymakers uncomfortable, as short-term metrics are running in the 3.5 per cent-to-4 per cent range. There’s real concern that with more persistent excess demand.”
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