Home Economics: Hike Now or Wait – Bank of Canada Edition

0
The Bank of Canada: Will they or not?

This is the big question everyone is asking ahead of the Bank of Canada’s January 26 interest rate decision. The latest company to ask for a quarter-point rate hike next week is National Bank Financial, with its strategists saying high inflation, a strong labor market and the Bank of Canada’s recent business outlook survey give the central bank a “free option” to raise rates this month. During this time, Scotiabank expects the Bank of Canada to lower its key rate to 2% by the end of the year.

Speaking of that searing inflation data…

According to Statistics Canada, consumer prices jumped 4.8% on an annualized basis in December – the highest rate since 1991. The data bolstered expectations that the Bank of Canada could begin its rate hike campaign as early as next week.

Will higher rates help improve housing affordability? Probably not

All owners who hope improving housing affordability amid higher borrowing rates will likely be disappointed, according to TD Securities’ Andrew Kelvin. He said higher rates will only impact the psychology around the real estate sector “at the margin”, as monetary policy would still be in a “broadly accommodative situation”.

Banking investors could be more bullish: analyst

Investors with stakes in major Canadian banks have already seen their holdings increase, in part in anticipation of higher interest rates. Now a veteran banking analyst has said there could be even more money to be won. Barclays Capital’s John Aiken raised his price targets on the Big Five by an average of 10%. He argues that banks will get “palpable” relief on net interest margins, despite any negative impact on domestic operations from the tightening of COVID restrictions.

Where is Shopify and the wider tech industry headed?

As banks get a boost, the once high-flying tech sector takes a hit, including former Shopify tech darling. The stock has plunged about 40% since its peak in mid-November, and many analysts attribute the decline to risks stemming from rising interest rates. Only time will tell if there is more room for Shopify shares to fall or if the drop presents a good buying opportunity for investors.


TIP JAR

6

– The number of times the Bank of Canada is expected to raise its key rate this year, according to Bloomberg data as of Friday.

Share.

Comments are closed.