Canada
The Bank of Canada as expected followed thru with a 25 bps rate hike to .75%. They said “Recent data have bolstered the Bank’s confidence in its outlook for above potential growth and the absorption of excess capacity in the economy. The Bank acknowledges recent softness in inflation but judges this to be temporary.” They said “temporary” because recent reads have included “heightened food price competition, electricity rebates in Ontario, and changes in automobile pricing.” They also spoke very positively about the Canadian economy “fueled by household spending” which as a result, “a significant amount of economic slack has been absorbed.”
There was not much clue as to whether they will hike again soon but the optimistic economic commentary and downplaying of the recent inflation numbers resulted in a spike in the Canadian dollar (see chart) and a rise in yields. The 2 yr note yield is up by 2.5 bps to 1.15%, just off the highest level since September 2014.They said officially though, “Future adjustments to the target for the overnight rate will be guided by incoming data as they inform the Bank’s inflation outlook, keeping in mind continued uncertainty and financial system vulnerabilities.”
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.