Bank of Canada Leaves Rates at 3.00%, Issues Hawkish Statement

As expected, the Bank of Canada left rates unchanged at 3.00 percent but given the commentary in the Bank's policy statement, it appears that they have absolutely no intention of cutting rates further and in fact, may consider increasing interest rates. The Bank identified three issues affecting the economy: the US economic slowdown, the financial market turmoil, and rocketing commodity prices. While the first two had developed in line with the expectations outlined in the April Monetary Policy Report, the latter has been stronger than anticipated and as a result, "total CPI inflation over the next year is expected to be much higher than projected at the time of the April Report." Clearly, the Bank of Canada now holds a much more hawkish bias than previously held. Nevertheless, with the financial markets remaining jittery, the turmoil may not be over yet and could counter the risks that the Bank will increase interest rates anytime soon.

DailyFX

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