18 April 2018

Since the last July, the BoC has raised the rate three times already, and the markets expect the next rate hike in July 2018. Although almost no one predicted a rate change in April, certain investors had expected a possible hike or a more aggressive tone, so the loonie went down slightly following the rate decision announcement.

“In our opinion, the Bank will raise its key rate in July,” – said Sal Guatieri, senior economist at BMO Capital Markets.

“Of course, any bad news concerning trade protectionism or NAFTA could make the Bank postpone the increase – just like a stronger than expected housing market slowdown caused by stricter mortgage rules,” – Guatieri noted.

The bank stressed once again that it would remain cautious in terms of rate hikes, monitoring how Canadians with the high debt levels manage borrowing costs growth. According to Poloz, the BoC is watching closely to see the full influence of new mortgage rules on the real estate market cooling.

“There are many factors affecting the national economy. Some of them are the results of the financial crisis, the debt growth, the uncertainty around NAFTA, the competitiveness challenges. In fact, it’s a very long list of issues which could remain in the background, but still slow down the economy”, – he added.

The central bank cut its economic growth expectation for this year, but raised for the next one, noting, that the economy is slowing slightly.