It seems like the waiting game regarding the possibility of the central bank raising interest rate will finally come to an end this July, after Governor Stephen Poloz said that he expects to continue raising interest rates despite “mounting trade tensions.” One possible explanation: inflation rates have already hit 2 percent, an internal marker for the central bank regarding rate hikes.

Bloomberg reported that chances of hike increased to more than 70%, up from 50% the day before the governor made his statement.

Poloz was also firm in relating a potential rate hike to the country’s economy. “We’ve said clearly that, given where the economy is, we’re in a situation where the economy will warrant higher interest rates. We’ll ensure that that is a gradual process because there are certain issues that we must monitor along the way, and we’ve laid those out,” he told reporters during an engagement in Victoria, British Columbia.

Given the turn of events, investors are now nearly assured that the interest rate climb is happening. One of the firsts to express such sentiment was Derek Holt, an economist at Scotiabank “On balance, I have more conviction that the BoC will hike on July 11th following Poloz’s communications than beforehand,” he said.

Poloz mentioned that the “big picture” regarding the economy supported a rate hike, as rates have been historically low. Of course, the Bank of Canada has already hiked interest rates three times over the last year, bringing its average rate to 1.25%.

The Bank of Canada has already hiked interest rates three times over the last year, bringing its average rate to 1.25%.

 

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