U.S. Federal Reserve sets route for more rate hikes by the Bank of Canada

On Friday, U.S. Federal Reserve Chair Jerome Powell pointed out that the central bank hasn’t finished its rate-increase cycle and it will not hurry to reduce rates after that.

In a recent speech, Powell noted that “U.S. will probably need restrictive policy for some time” and that “history warns us against ‘prematurely’ loosening steps.”

According to Philip Petursson, chief investment strategist at IG Wealth Management, Powell’s speech was “more hawkish than what the market had hoped for.”

“In my opinion, Powell’s speech sets the route for the Bank of Canada to keep raising rates, even though I think the Canadian economy is potentially in a more vulnerable position than the U.S., because of the direct influence of the real estate market,” – Petursson explained.

“I think the BoC will follow the U.S. Fed for some time.”

Bank of Canada Governor Tiff Macklem is expected to raise the key lending rate once again on September 7.

Petursson believes a 0.75% increase is a given, but there’s also risk of a full percent hike.