Bank of Canada Hikes Rates 50 bps to Highest Level Since 2008

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    Bank of Canada’s Mackem:

    To hit 2% inflation target we need to rebalance labor market
    there is scope to cool labor market without causing the kind of unemployment surge we have typically experienced a recession’s
    suggest unemployment rate will rise somewhat if the job vacancy returns to more normal levels, but it would not be high unemployment by historical standards
    slightly negative growth is possible over the next few quarters
    that’s not a severe recession, but it is a significantly slowing of the economy
    right now we need the economy to slow down
    to reach 2% inflation target we need to rebalance labor market and that will be a difficult adjustment
    in recent months we are seeing additional signs that exceptionally tight labor market conditions have started to ease, wage growth looks to be plateauing
    much of the inflation Canada is experiencing reflects domestic factors, namely excess demand in economy
    Will be watching broad set of indicators to gauge health of labor market
    we will be looking beyond headline unemployment numbers to gauge how different groups and labor market are adjusting
    it will be hard to know when we have reached maximum sustainable


    The Bank of Canada senior deputy governor Carolyn Rogers

    higher rates are starting to work to slow the economy and tame inflation
    risk of a trigger that may affect financial stability has increased, sites high household that an elevated house prices as long-standing vulnerabilities
    we have a long way to go to get inflation back to target
    adjustment will be painful
    we are not expecting a severe economic downturn with the kind of large job losses typical of past recessions
    there are good reasons to believe system as a whole will be able to whether this period of stress and remained resilient
    we need lower house prices to restore balance to housing market, this could add stress for people who bought property recently with a variable rate mortgage
    Bank research paper says that if rates go up another 50 basis points by May 2023, total number of variable-rate fixed payment mortgages hitting trigger point could rise to 65% (or 17% of all mortgages from 50% now)


    Canada growth numbers
    GDP (M/M) Sep: 0.1% (est 0.1%; prevR 0.3%)
    GDP (Y/Y) Sep: 3.9% (est 3.8%; prev 4.0%)
    Canadian Quarterly GDP Annualized Q3: 2.9% (est 1.5%; prevR 3.2%)

    Helmholtz Watson

    Bank of Canada raised the target for its overnight rate by 50bps to 4.25% in December 2022, the market had been pricing a 62% chance of a 25-bps hike
    [See the full post at: Bank of Canada Hikes Rates 50 bps to Highest Level Since 2008]

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