BoC Governor’s Comments Today Hint at July Rate Hike

Speculation that the Bank of Canada is preparing to raise its key interest rate continued to ramp up after governor Stephen Poloz’s latest comments to a German newspaper published Tuesday.

While talk about a possible rate hike by the Bank of Canada has increased, inflation in Canada has remained low.

However, Poloz said in the interview with Handelsblatt last week that there is a substantial lag between when the economy approaches full capacity and when that begins to translate into inflation.

usdcad Canadian dollar graph, July 4, 2017

He said if the central bank only watched and reacted to inflation, it would never reach its inflation target and it would always be two years behind in the reaction.

Poloz noted that he has to look at other indicators in the models that predict inflation.

The Bank of Canada’s key interest rate target has been set at 0.5 per cent since 2015. The central bank’s next rate announcement is set for July 12.

via Globe and Mail

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza