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Better than expected growth Bank of Canada increases Interest Rates

No matter what your viewpoint today many of the worlds economies are bouncing. Leaders are focused on trade imbalances and that uncertainty seems to affected economic activity and outlooks on a global scale.

Despite slower growth, recently released economic numbers were better than originally forecast. While manufacturing saw a slight pull back, the bulk of the sub-sectors monitored by Stats Canada grew, leading to a 0.8% increase. Retails sales experience a slight pull back but overall output in the sector was enough for it to reach the 25th consecutive month of expansion.

The Canadian dollar lost some ground against the US greenback. The upside – a falling loonie is good for exporters and the tourism industry across Canada. A softer Canadian dollar against the Euro should also benefit exporters taking advantage of the Canadian-European Union Comprehensive Economic Trade Agreement (CETA). CETA opens up a market of over 510 million people representing roughly 22% of Global GDP.

At the beginning of June, many economists were on the fence with regard to a July BoC rate hike. But with the better than expected data, it was not surprise that on July 11th the BoC bumped the Key Rate up a quarter point to 1.5% in a continued plan to head towards more ‘normal’ interest rates.

What lies ahead? With a decade of super low interest rates, the World Bankers seem to be trying to figure out what the new normal on interest rates should be. Could lead to another bump in the coming months.

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