Central bank's interest hike almost certainly coming in July

The expectation for a July 11 rate hike has climbed owing to Canada’s recent Gross Domestic Product (GDP) growth and strong market demand, with the odds surging to almost 80% from 67% according to a Reuters report on June 29.

Statistics Canada recently disclosed that, for the seventh time over the eight months, the GDP increased by .1%. This was complemented by the Bank of Canada, which cited higher pressure on capacity and prices, as well as labor market shortages as evidence of strong consumer demand in the second quarter.

“This certainly doesn’t hurt the case for a hike [in July] with growth beating expectations and with Statistics Canada sounding fairly aggressive that it would have been stronger yet if it were not for adverse weather effects,” said Derek Holt, Vice President of Capital Markets Economics at Scotiabank.

“I think the bank is going in July,” he said in an interview with Reuters.

Aside from lower retail trade and construction rate, down by 1.3%, and .5%, respectively, due to colder temperatures, the country’s economy looked rather rosy.

Consider the growth of manufacturing, which rose by 0.8% from March’s figures. Canadian producer prices, driven by more expensive prices for energy and petroleum products, also increased by 1% in May from April, the fifth consecutive increase.

Finally, the Canadian dollar recorded 10-day high against its U.S. counterpart. “Shortly after the [Statistics Canada’s] data release, it was trading 0.4 %higher at $1.3200 to the greenback, or 75.76 U.S. cents,” said Reuters.

 

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