Large banks transfer to match Financial institution of Canada's fee hike

Large banks transfer to match Financial institution of Canada's fee hike

Large banks transfer to match Financial institution of Canada's fee hike

After staying on the sidelines for the better part of a decade following the financial crisis, Canada's central bank raised its key interest rate twice past year, to one per cent.

The benchmark interest rate for Bank of Canada is being held at 0.5 per cent and given a more profound evaluation of the risks link with the major unknown economic effect of Trump being the president of the United States.

The Central Bank confirmed on Wednesday that the cost of money is going up, citing stronger employment and GDP growth in 2017, as well as increased activity in residential investment and consumption by consumers.

In a release on the Bank of Canada website this morning, expected growth in the global economy is expected to average 3.5 per cent over the projection horizon.

The central bank estimates the economy grew 3% previous year, and is expected to expand 2.2% in 2018. Further, the central bank said it is monitoring the extent to which stronger demand and investment are boosting the level of potential gross domestic product, or the amount of growth that can unfold before inflationary pressures are triggered.

A class-action lawsuit filed in a USA court alleges six Canadian banks and three others conspired to increase the profitability of their derivatives trading business by manipulating an interest rate benchmark for about seven years. The level of business investment is expected to be 2% lower by 2020 than what would otherwise be the case due to trade-policy uncertainty, the Bank of Canada estimated.

Underlying economic fundamentals at home and overseas have strengthened, and would otherwise suggest a strong pickup in business investment and exports, the bank said.

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But while broadly positive about the economy's prospects, the bank cited "uncertainty about the future of NAFTA" as a reason for concern moving forward.

The central bank said it expects inflation to remain close to its 2% target through 2019. By making NAFTA risks so prominent in this Statement, rate hike odds will now ebb and flow with the negotiations, even moreso than earlier. A hike this week would make it harder for most borrowers to qualify for a new mortgage.

The bank slightly increased its predictions for 2018, up to 2.2 per cent from 2.1 per cent.

Poloz raised rates in July and September in response to a surprisingly strong economic run that began in late 2016.

Heading into the decision Wednesday, Scotiabank Economics forecasted three hikes totalling 75 basis points throughout 2018 and three more in 2019.

While the economic outlook is expected to warrant higher interest rates over time, some continued monetary policy accommodation will likely be needed to keep the economy operating close to potential and inflation on target.

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