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In a widely expected decision, the Bank of Canada has announced its decision to hike its policy, overnight, rate by 25 basis points to 1.5%. Investors are now waiting for the Governor Poloz’s speech. Below are the key takeaways from the official statement.  

  • The Bank expects the global economy to grow by about 3 ¾ per cent in 2018 and 3 ½ per cent in 2019, in line with the April Monetary Policy Report.
  •  The possibility of more trade protectionism is the most important threat to global prospects.
  • Canada’s economy continues to operate close to its capacity and the composition of growth is shifting.  
  • CPI and the Bank’s core measures of inflation remain near 2 per cent, consistent with an economy operating close to capacity.
  • CPI inflation is expected to edge up further to about 2.5 per cent before settling back to 2 per cent by the second half of 2019.
  • Governing Council expects that higher interest rates will be warranted to keep inflation near target and will continue to take a gradual approach, guided by incoming data.
  • In particular, the Bank is monitoring the economy’s adjustment to higher interest rates and the evolution of capacity and wage pressures, as well as the response of companies and consumers to trade actions.