{"id":1557232,"date":"2022-07-16T06:00:25","date_gmt":"2022-07-16T10:00:25","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1557232"},"modified":"2022-07-16T06:19:36","modified_gmt":"2022-07-16T10:19:36","slug":"canada-hikes-interest-rates-1","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/canada-hikes-interest-rates-1\/","title":{"rendered":"Canada Hikes Interest Rates 1%"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"float:left\"><div class=\"counts mashsbcount\">10<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Fcanada-hikes-interest-rates-1%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1557232&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><figure class=\"caas-figure\">\n<div>\n<div>\n<div class=\"caas-img-container noheight\"><\/div>\n<\/div>\n<\/div>\n<p><figcaption class=\"caption-collapse\">Canada goes \u2018nuclear\u2019 with supersized 1% interest rate hike \u2014 will the Fed follow?<\/figcaption><\/p>\n<\/figure>\n<p>The pressure on Federal Reserve Chair Jerome Powell to strike harder against inflation grew even stronger today as his Canadian counterpart announced a supersized interest rate hike of a full percentage point.<\/p>\n<p>The move left Canadians reeling \u2014 especially given the implications for their overheated housing market and heavy debt loads \u2014 but it also left their southern neighbors wondering if the same thing could happen here.<\/p>\n<p>With the Fed\u2019s next meeting scheduled for July 26 to 27, analysts are already wagering that Powell will follow in Bank of Canada Governor Tiff Macklem\u2019s heavy footsteps.<\/p>\n<p>Here\u2019s why central banks around the world are entertaining such drastic measures \u2014 and what it\u2019ll mean for consumers.<\/p>\n<h2>Don\u2019t miss<\/h2>\n<h2>Canada chooses a hawkish route<\/h2>\n<p>Normally, the Bank of Canada aims to keep inflation at a modest 2%, just like the Federal Reserve does.<\/p>\n<p>So when Canada\u2019s inflation rate hit <a href=\"https:\/\/www150.statcan.gc.ca\/n1\/daily-quotidien\/220622\/dq220622a-eng.htm?indid=3665-1&#038;indgeo=0\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:7.7% in May\" class=\"link\">7.7% in May<\/a> \u2014 its highest rate in nearly 40 years \u2014 it called for a much more aggressive response.<\/p>\n<p>The country\u2019s central bank typically tinkers with its key policy rate in modest 0.25% increments, but Macklem announced July 13 that it would surge a full 1%.<\/p>\n<p>That brings the Canadian overnight rate to 2.50%.<\/p>\n<p>An increase of this size hasn\u2019t happened since 1998. And while it\u2019s going to have immediate implications for consumers, experts say it\u2019s a necessary step for putting out the flames of inflation \u2014 even if it extinguishes Canada\u2019s economy in the process.<\/p>\n<h2>Why Canada is being so aggressive<\/h2>\n<p>May&#8217;s inflation figure was even higher than the central bank was anticipating, which means Macklem\u2019s main concern right now is preventing high inflation from becoming entrenched.<\/p>\n<p>It\u2019s a difficult balance all central banks need to weigh. The Bank of Canada, like the Fed, chose to keep rates close to zero for the first two years of the pandemic to help boost the economy, but creeping inflation has forced them to act.<\/p>\n<p>Typically, analysts would worry these supersized hikes could push the country into a recession.<\/p>\n<p>Moshe Lander, an economist with Montreal&#8217;s Concordia University, says a hike of this size is not only a \u201cdepressing move\u201d but could also \u201ctake some of the starch out of the Canadian economy in the process.\u201d<\/p>\n<p>Although Lander has reservations about such a big hike, he can\u2019t deny that inflation remains stubbornly high despite the bank\u2019s efforts these last few months.<\/p>\n<p>\u201cAnd so [the bank has] no choice but to go nuclear and go with that depressing increase,\u201d says Lander.<\/p>\n<p>The risks of such a hawkish move are worth taking, <a href=\"https:\/\/economics.bmo.com\/en\/publications\/detail\/657f89e6-15bd-4171-83f1-0aec6d789668\/\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:writes\" class=\"link\">writes<\/a> the Bank of Montreal\u2019s chief economist, Douglas Porter.<\/p>\n<p>\u201cRecession calls have become mainstream for the broader economy,\u201d Porter wrote in a recent note to clients.<\/p>\n<p>\u201cBut those rising risks simply cannot and will not sway the bank from soldiering on; the <em>risk<\/em> of recession has to be a secondary consideration to the <em>reality<\/em> of red-hot inflation.\u201d<\/p>\n<h2>Canada and the U.S. move slowly compared to others<\/h2>\n<p>This is the Bank of Canada\u2019s fourth interest rate increase in five months, and Macklem has already signaled it\u2019s not done yet.<\/p>\n<p>Many other countries outside of North America have been forced to take similarly aggressive steps.<\/p>\n<p>In fact, the major criticism from Canadian economists has been that the Bank of Canada waited too long to pull out the big guns compared to other central bankers.<\/p>\n<p>\u201cAll they have done today is to tiptoe into the neutral policy setting, when what Canada needs to counter inflation is something more deeply into restrictive territory,\u201d RBC economist James Orlando told <a href=\"https:\/\/financialpost.com\/news\/economy\/bank-of-canada-steep-rate-increase-economists\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:the Financial Post\" class=\"link\">the Financial Post<\/a>.<\/p>\n<p>\u201cFront-loading would have been like the (Reserve Bank of New Zealand) and (Bank of Korea) did when they began hiking last summer.\u201d<\/p>\n<p>The Reserve Bank of New Zealand announced its first interest rate hike in October of last year. And while the economy has started to show some signs of slowing, Governor Adrian Orr insists it was correct for the bank to move early and fast, saying it remains \u201cresolute in its commitment\u201d to bring down inflation.<\/p>\n<p>Similarly, the Bank of Korea started raising rates in November 2021 and announced its sixth hike July 12, bringing the overnight rate to 2.50% there.<\/p>\n<h2>How might this affect the Fed\u2019s next announcement?<\/h2>\n<p>If Canadian inflation is running as hot as a <a href=\"https:\/\/economics.bmo.com\/en\/publications\/detail\/657f89e6-15bd-4171-83f1-0aec6d789668\/\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:\u201cfour-alarm fire\u201d\" class=\"link\">\u201cfour-alarm fire\u201d<\/a> \u2014 as BMO\u2019s Porter so eloquently put it \u2014 then the U.S. is dealing with a five-alarm inferno.<\/p>\n<p>On the same day as Macklem\u2019s announcement, the Bureau of Labor Statistics <a href=\"https:\/\/www.bls.gov\/news.release\/cpi.nr0.htm\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:released updated inflation figures\" class=\"link\">released updated inflation figures<\/a> for the month of May.<\/p>\n<p>At a staggering 9.1%, U.S. inflation is at a 41-year high.<\/p>\n<p>Although Powell <a href=\"https:\/\/moneywise.com\/news\/economy\/federal-reserve-interest-rate-hike-june-2022?utm_source=syn_oath_mon&#038;utm_medium=Z&#038;utm_campaign=22420&#038;utm_content=oath_mon_22420_announced+a+0.75%25+increase+in+May\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:announced a 0.75% increase in May\" class=\"link\">announced a 0.75% increase in May<\/a> \u2014 the largest bump in nearly 30 years \u2014 American economists have also criticized the bank for waiting too long to act.<\/p>\n<p>Back in June, Powell said July\u2019s announcement was likely to come down to a 0.50% or 0.75% increase, but the news from up North along with the scorching-hot inflation numbers may push him to act even more aggressively.<\/p>\n<p>By Wednesday afternoon, investors were pricing in over a 75% chance of a 100 basis points hike in July, according to the <a href=\"https:\/\/www.cmegroup.com\/trading\/interest-rates\/countdown-to-fomc.html\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:CME Fedwatch tool\" class=\"link\">CME Fedwatch tool<\/a>.<\/p>\n<p>With the Fed\u2019s overnight rate now sitting at 1.75% and plans to raise that to at least 3.4% by the end of the year, it\u2019s all but certain there will be an increase announced later this month.<\/p>\n<p>What\u2019s less certain now is what that number will be.<\/p>\n<h2>What to read next<\/h2>\n<ul class=\"caas-list caas-list-bullet\">\n<li>\n<p><a href=\"https:\/\/moneywise.com\/subscription\/investing?utm_source=syn_oath_mon&#038;utm_medium=Z&#038;utm_campaign=22420&#038;utm_content=oath_mon_22420_Sign+up\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:Sign up\" class=\"link\">Sign up<\/a> for our MoneyWise newsletter to receive a steady flow of <a href=\"https:\/\/moneywise.com\/subscription\/investing?utm_source=syn_oath_mon&#038;utm_medium=Z&#038;utm_campaign=22420&#038;utm_content=oath_mon_22420_actionable+ideas\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:actionable ideas\" class=\"link\">actionable ideas<\/a> from Wall Street&#8217;s top firms.<\/p>\n<\/li>\n<li>\n<p>US is only a few days away from an \u2018absolute explosion\u2019 on inflation \u2014 here are <a href=\"https:\/\/moneywise.com\/investing\/stocks\/us-is-only-a-few-days-away-from-an-absolute-explosion-on-inflation?placement=WTRN2&#038;utm_source=syn_oath_mon&#038;utm_medium=Z&#038;utm_campaign=22420&#038;utm_content=oath_mon_22420_3+shockproof+sectors\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:3 shockproof sectors\" class=\"link\">3 shockproof sectors<\/a> to help protect your portfolio<\/p>\n<\/li>\n<li>\n<p>\u2018There\u2019s always a bull market somewhere\u2019: Jim Cramer\u2019s famous words suggest you can make money no matter what. Here are <a href=\"https:\/\/moneywise.com\/investing\/stocks\/theres-always-a-bull-market-somewhere-jim-cramer?placement=WTRN3&#038;utm_source=syn_oath_mon&#038;utm_medium=Z&#038;utm_campaign=22420&#038;utm_content=oath_mon_22420_2+powerful+tailwinds\" rel=\"nofollow noopener\" target=\"_blank\" data-ylk=\"slk:2 powerful tailwinds\" class=\"link\">2 powerful tailwinds<\/a> to take advantage of today<\/p>\n<\/li>\n<\/ul>\n<p><em>This article provides information only and should not be construed as advice. It is provided without warranty of any kind.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Canada goes \u2018nuclear\u2019 with supersized 1% interest rate hike \u2014 will the Fed follow?The pressure on Federal Reserve Chair Jerome Powell to strike harder against inflation grew even stronger today<\/p>\n","protected":false},"author":1,"featured_media":1573953,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[],"tags":[],"class_list":["post-1557232","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1557232","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1557232"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1557232\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/1573953"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1557232"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1557232"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1557232"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}