The Central Bank of Canada (BOC) is expected to further reduce its stimulus to the economy at tonight’s policy meeting, paving the way for an immediate interest rate hike next year amid rising inflationary pressures.
Revealing the events of last April, the BOC has become the first major central bank to start reducing bond purchases with an additional measure in July and it is now expected to make the reduction again this month.
Governor Tiff Macklem is expected to reduce weekly government bond purchases to $ 1 billion from current levels of $ 2 billion.
The strengthening recorded in the positive economic report is also seen to support investor confidence that the BOC will make a cut and end it in December, especially after Governor Macklem told inflation may continue longer than expected.
This can be seen in a series of economic data, including the unemployment rate falling to an 18 -month low, rising manufacturing and retail sales activity, and an inflation surge at the fastest rate in 18 years.
Along with current inflationary pressures, investors also did not rule out the possibility that interest rates would rise faster than expected. Previously, the BOC said the rate hike would not happen until mid -2022.
Ahead of the BOC policy meeting, the loonie dollar traded stable around 1.2390 against the US dollar, not far from the 3 -month high it reached last week.
