Bank of Canada holds their benchmark interest rate steady at 1%
Back in July, the Bank of Canada raised their benchmark interest rate for the first time in 7 year, brining the number to 0.75%. Then again in September, they raised it another 0.25% to and even 1%. In October, the bank decided to hold steady at the 1% mark, and have decided to maintain that number again this month.
"While higher interest rates will likely be required over time," the bank said, "the current stance of monetary policy remains appropriate."
Ahead of the announcement of the decision, overnight swap contracts suggested that investors only thought there was about a 16 per cent chance of a rate hike. For January, the market is currently pricing in about a 33 per cent chance of a hike.
The night before the announcement was made, it was believed that only 16% of investors believed that there was any chance of an interest rate hike. And, it is projected that, based off of current market pricing, there is a 33% chance of a hike. Bank of Montreal economist Doug Porter said that projection is because the bank said it would continue to be "cautious" about setting monetary policy.
"Keeping that word suggests there is presumably little chance of a move at the next meeting in January," Porter said.
The loonie moved lower on the news, half a cent to 78.29 cents US, then close down nearly half a cent at 78.20 cents US.
"The Bank of Canada reaffirmed its cautious stance on interest rate hikes Wednesday," Cambridge Payment Solutions strategist Don Curren said after the statement came out. "Its policy statement was a little more dovish than some in the market anticipated, prompting the loonie to lose some altitude, but stay within recent ranges."