The Bank of Canada agreed that the need for further rate hikes would be determined by fresh economic data after it lifted rates to a 22-year high earlier this month, minutes from their policy meetings released on Wednesday showed.
Analysts said the tone of the notes made it clear the central bank was likely to raise rates again next month.
On June 7 the bank, which had been on hold since January, raised its overnight rate to 4.75%. In its summary of deliberations, or minutes, the governing council said growth and inflation had been stronger than expected.
“Members were of the view that with the resurgence in household spending growth, the pickup in consumer confidence, and the slowing in disinflationary momentum, monetary policy did not look to be sufficiently restrictive,” the minutes said.
The governing council discussed whether to signal a rate increase and then execute it in July, but decided there was enough data to act immediately.
The council then agreed to “assess the need for further policy rate increases based on the incoming data.” The council was concerned inflation could become stuck at a level materially above the bank’s 2% target.
Money markets see a roughly 72% chance that the bank will raise its policy rate by 25 basis points on July 12.
“It’s all about the data … for now, we continue to look for a hike in July,” said Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Markets.
After the minutes were released, the Canadian dollar was trading at a nine-month high of 1.3162 to the greenback, or 75.98 U.S. cents, up 0.5% on the day.
“We don’t believe Canadian central bankers are done with rate hikes just yet … the key concerns that policy-makers outlined in today’s summary of deliberations will likely still be unnerving in a few weeks,” said Tiago Figueiredo, a macro strategist at Desjardins.
Ahead of the June hike, statistics showed April annual inflation accelerated for the first time in 10 months to 4.4%, and first-quarter GDP rose 3.1% – versus the central bank’s 2.3% forecast – driven in part by consumer spending.
Since the June decision, Canada unexpectedly shed jobs in May, a possible first sign of a softening in the labour market. But the latest retail sales report for April and a May estimate issued on Wednesday suggest consumer spending remains strong.
The governing council said it expected second quarter growth would outpace the 1% annualized pace it forecast in April.
“Governing Council agreed that the economy remained clearly in excess demand and that the rebalancing of supply and demand was likely to take longer than previously expected,” the minutes said.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.
She says the changes will come into force in December and better reflect the housing market.
The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.
Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.
Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.
The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.
The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.
The increase followed a 1.7 per cent decrease in June.
The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.
Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.
Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.
In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.
This report by The Canadian Press was first published Sept. 16, 2024.
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