![]() ![]() “Today’s stock investors are trying to figure out when the next rate hike is coming,” he said. “Whatever a hike will do to the dollar, it already did to the dollar in the last few weeks.”Īccordingly, Canada’s stock markets have already adjusted. “I think people have been expecting this interest rate hike for some time,” he said. He said the loonie’s value relative to the US greenback only affects certain Canadian segments – not Canada’s entire economy, noting that Canadians have reduced spending power south of the board and in Europe. Lucas Herrenbrueck, an associate economics professor as Simon Fraser University in the Vancouver area, offered a slightly different view. “At the end of the day, investors will have to put their money somewhere,” he said. But he believes that both the bond and stock markets will adjust. The rate hike could prompt investors to show a short-term preference for bonds, and stock prices will probably stop rising for a while, but without a market crash, he predicted. “In the short run though, everyone would enjoy the greater purchasing value of the loonie,” said Indart. “ could have a disastrous effect on Canada’s non-commodity tradeable sector in the medium run, as it did before the Great Recession,” said Indart.Ĭanadian consumer goods, business services and capital goods would become too expensive for many when converted to US dollars, he explained. A lower loonie also helps spur US investment in Canada. A lower loonie results in higher Canadian export revenues. The US is Canada’s largest trading partner, while Canada ranks as the second-largest US trading partner, losing its long-time number-one status to China. “If the Fed does not and the Bank of Canada continues increasing the rate, then there would be great risk of an overvaluation of the loonie,” said Indart. Loonie in good positionĪs long as the BoC follows the US Federal Reserve’s (the Fed’s) trend of increasing interest rates – as it appears will be the case – the Canadian dollar, known as the loonie, will be in a good position relative to its US counterpart, University of Toronto associate economics professor Gustavo Indart told. The rate rose 25 basis points (bps) to 0.5% in March after two years of Covid-19-induced pressures caused a freeze in interest-rate changes. ![]() Each increase in this period was 0.25%.ĭesigned to curb rapidly accelerating inflation, Wednesday’s increase was only the second since 2018. The central bank had not implemented a 0.5% interest-rate increase for 22 years, since May 2000. The Bank of Canada (BoC) raised its benchmark rate by 0.5% to 1% on Wednesday and signalled more hikes to come. The Bank of Canada introduced a 0.5% interest rate hike on Wednesday for the first time since 2000 – Photo: ShutterstockĬanada’s exit from its interest-rate comfort zone – for the first time since 2000 – will keep the country’s currency at a good value, but spell short-term stock-price declines, says a leading finance analyst in an exclusive interview with. ![]()
0 Comments
Leave a Reply. |