OTTAWA: With no change in interest rates expected when the Bank of Canada announces its latest decision this morning, economists and markets will be eyeing the latest update on the central bank’s outlook for the economy for hints on future hikes. The rate decision comes amid signs that the Canadian economy has cooled off following a lengthy period of growth. The bank is slated to announce its rate decision and release its autumn monetary policy report at 10 a.m. ET. That will be followed at 11:15 a.m. ET by a news conference with bank governor Stephen Poloz and senior deputy governor Carolyn Wilkins. Economists are pretty much united in their expectations that the Bank of Canada will not boost its key target for the overnight rate — what big banks can charge for overnight loans — when it announces its latest monetary policy today. The rate currently stands at one per cent. The bank has already boosted that rate by 0.25 of a percentage point twice this year, once in July, which was the first increase in the target for the overnight rate in seven years, and once again in September. “We anticipate that the underlying message from the [Bank of Canada] regarding the longer-term direction should be one of gradually higher interest rates on the assumption the central outlook holds,” Peter Dragicevich, global foreign exchange analyst at Nomura wrote in a recent research note.
The bank’s two rate increases came against a backdrop of strong growth in the Canadian economy. Canadian gross domestic product increased for eight strong months before a flat reading for July ended the streak. GDP figures for August are due to be released by Statistics Canada on Oct. 31. BMO Capital Markets economist Benjamin Reitzes said the bank’s monetary policy report will see changes to the growth outlook as second-quarter GDP was well above the bank’s expectations. “That will prompt 2017 to be revised up to about 3.1 per cent, which will match the best pace since 2005,” Reitzes wrote in a recent commentary. “Despite that upgrade, the projection for Q3 GDP is expected to hold steady at two per cent, while Q4 will likely be introduced at a similar level.”
