Wednesday, September 8, 2010

Bank of Canada Hikes Interest Rates to 1%

(Paul Vieira — Financial Post)

The Bank of Canada raised its benchmark interest rate Wednesday by 25 basis points to 1%, arguing financial conditions remain “exceptionally stimulative” even in the face of a slowing — but still growing — economy.

Following the announcement, market watchers said traders increased the odds of another rate hike in 2010. However, others suggested a long pause could be in store as they focused on the final line in the statement that said any further reduction in monetary policy stimulus would need to be “carefully considered in light of the unusual uncertainty” over the economic outlook.

“This is key … as it appears to indicate the Bank of Canada’s intention to pause the [rate-hiking] process,” said Michael Woolfolk, senior currency strategist at BNY Mellon in New York, adding the pause could extend beyond the “next meeting or two.” Read more: here.