C$ rallies as BoC hikes rates despite NAFTA cloud

Loonies Wild Ride: Bank of Canada (BoC) Hikes Rates

The Bank of Canada is widely expected to raise its overnight target rate by another quarter point at its upcoming meeting on Wednesday. The Bank Rate is correspondingly 1 1/2 per cent and the deposit rate is 1 per cent. On the other hand, the bank predicted that Canada will see a small benefit from the recent USA tax changes thanks to increased demand.

As of Thursday, Jan. 18, all five now have the same prime lending rate of 3.45 per cent.

Royal Bank was among 16 global banks sued by the U.S. Federal Deposit Insurance Corp.in 2014 for its role in manipulating the London interbank offered rate from 2007 to 2011.

Looking forward, consumption and residential investment are expected to contribute less to growth, given higher interest rates and new mortgage guidelines, while business investment and exports are expected to contribute more.

C$ rallies as BoC hikes rates despite NAFTA cloud

In the MPR, the bank nudged up its expectations for how the economy will perform this year and next.

The hike acknowledges that recent data has come in stronger than the bank had expected, inflation is close to the bank's 2 percent target, and the economy is now operating at full potential with no output gap. The two-year was down 2 cents to yield 1.784 per cent and the 10-year declined 22 cents to yield 2.199 per cent.

A 25-bps increase to the prime rate, which now sits at 3.20%, would increase payments for most adjustable-rate mortgage (ARM) holders and those with lines of credit.

The central bank made the quarter-point jump over uncertainty surrounding the future of NAFTA.

SPDR Dow Jones REIT ETF (RWR) Rises 0.79% for Jan 16
The biggest gains were for pharmaceutical company Merck & Co, health insurer United Health and digger manufacturer Caterpillar. The large-cap S&P 500 Index (NYSARCA:SPY) declined 0.4% to close at 2,776.42, with eight of 11 sectors reporting decline.

"At this stage, it is hard to predict the possible outcomes of trade negotiations and the timing, incidence and magnitude of their effects", the bank said in its MPR, which mentions NAFTA concerns nine times in the 21-page document.

The U.S. could also layer on additional trade actions that would worsen the blow, he said, citing ongoing actions in the aerospace and lumber sectors.

Reaction to the rate move was muted, as the decision was very much expected.

Economist Frances Donald with Manulife agrees with that assessment, telling CBC News in an interview that while the market was expecting as many as three hikes this year, the situation is fluid. "But in this case the rate hike itself was already reflected in market prices.so the real question on investors' minds was would the Bank of Canada provide more hawkish guidance about future rate hikes?" said Todd Mattina, a chief economist at Mackenzie Investments.

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Emirates has urged Airbus to market the aircraft more widely across the world to ensure future production of the jet. The A380 has a list price of $437 million (€535 million), and as of December it had booked 317 orders for the plane.

While more rate hikes are probably warranted, some continued monetary policy accommodation will likely be needed to maintain optimal growth and inflation, the bank said, signaling it will not rush to return rates to more normal levels after they were slashed to historic lows in the wake of the financial crisis.

The BoC's qualification rate is all-important because it's used for most mortgage testing.

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Citing police, WSOC reported that the children's father has been located and he isn't a person of interest in the case. Christina worked as a Panthers' game day employee, Panthers spokesman Steven Drummond confirmed.

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