Bank of Canada hikes rates for the first time in seven years
- First rate hike since 2010
- 25 of 33 economists expected a hike
- The OIS market priced in a +90% chance of a hike
- Says softer inflation mostly from temporary factors
- Says output gap will close around the end of 2017 vs 'first half of 2018' before
- Recent data have bolstered confidence in outlook for above-potential growth
- Sees inflation close to 2% by mid-2018
- Economy has been 'robust', fuelled by household spending; a significant amount of slack has been absorbed
- Activity in housing sector has abated
- Household spending likely to remain solid in months ahead but pace will slow later
- Raises Q2 growth forecast to 3.0% from 2.5%. Sees 2.0% in Q3
- Raises 2017 growth forecast to 2.8% from 2.6%
Here is the forward guidance:
"Governing Council judges that the current outlook warrants today's withdrawal of some of the monetary policy stimulus in the economy. Future adjustments to the target for the overnight rate will be guided by incoming data as they inform the Bank's inflation outlook, keeping in mind continued uncertainty and financial system vulnerabilities."
I would call that a hawkish hike. There is no indication whatsoever of a one-and-done or two-and-done.
