STIM­U­LUS BUD­GET COULD LEAD TO RATE HIKE IN THE FALL

National Post (Latest Edition) - - FINANCIAL POST -

A stim­u­lus bud­get from Canada’s new Lib­eral govern­ment, com­bined with a mod­est re­cov­ery in oil and non-com­mod­ity ex­ports, makes it likely the Bank of Canada’s next move will be an in­ter­est rate rise rather than a cut. Econ­o­mists said the $29.4 bil­lion deficit for the com­ing fis­cal year, equal to about 1.5 per cent of GDP, di­min­ished but did not elim­i­nate the like­li­hood of an­other rate cut. How­ever, a poll of Cana­dian pri­mary deal­ers — the in­sti­tu­tions that deal di­rectly with the BOC at debt auc­tions — showed they ex­pect the cen­tral bank to hold steady at its next pol­icy meet­ing on April 15 and through 2016. They fore­cast the next step will be a hike in late 2017 or in 2018. Even be­fore the bud­get, the oil-price re­cov­ery and some en­cour­ag­ing eco­nomic data had traders re­con­sid­er­ing the like­li­hood of more eas­ing, which would have pushed the main pol­icy rate back to the post- cri­sis low of 0.25 per cent. The im­plied prob­a­bil­ity of a rate cut this year has col­lapsed to 21 per cent from 87 per cent a lit­tle more than one month ago.

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