July 14th 2022, 5:30:24 pm
(about a year ago)
Bank of Canada took the markets off guard.📈
North American markets stuttered on a shockingly hot US inflation and the Bank of Canada’s whole percentage interest rate hike.
All the stock indices failed to remain in the green territory as the US inflation was reported at 9.1% yearly vs. the 8.6% estimate. This is the hottest inflation in the US since 1981, and the biggest components are higher food and energy prices which are eating into the US households’ income. The hot inflation will increase the likelihood of the US central bank to increase the interest rates by another 0.75% in their next meeting to 2.5%. The short end of the US treasury curve, which reflects the short-term interest rates, jumped.
North of the border, the Bank of Canada was expected to increase the rates by 75 basis points, but markets were giving a 5% chance of a percentage increase in the policy rate. Nevertheless, the central bank"s one-percent rate hike to 2.5% was the biggest since 1998, and Canada now has the highest interest rate among the G10 countries. A considerable portion of Canadians has opted for variable-rate mortgages. Higher rates will add pressure and take a more significant chunk of their income toward their mortgage payments.