This week: Bank of Canada expected to announce another supersized interest rate hike to help temper inflation | GIC discussions | Discussion forum

.
That's ⬆ a good summation of what is already expected/assumed by many.

And I'm guessing we'll see SA & GIC rates Continue to go 'Up' during the month of June ... and beyond ❗

For those of us who can, some will be staying 'Short' for now, in anticipation of 5yr GIC rates hitting 5+% by July-ish.

What does your Crystal Ball say ❓

Dean

NCC1701Z said
Is this .5% increase already factored in the current 3-5 yr GIC rates ?

https://www.theglobeandmail.com/business/article-bank-of-canada-expected-to-use-another-supersized-hike-to-help-regain/

Article is behind a paywall. Excerpt:

"The Bank of Canada is expected to announce another oversized interest rate increase this week, part of its effort to push Canadian borrowing costs rapidly higher in the hope of slowing the pace of consumer price growth.

[...]

Bay Street forecasters widely expect the bank to follow up with another half-point move on Wednesday. That would bring the bank’s benchmark rate up to 1.5 per cent, just a quarter point below the prepandemic level."

Edit by admin: Removed most of the copied and pasted article text, in order to follow new forum rule #13 regarding referencing other websites  

5y GoC is still a 2.6% and 5Y GIC is at 4% handle. So yes, a lot of rate hikes are already baked in the current GIC rate. Consensus is BoC may take a pause at 3%, and if that is indeed true (which I doubt), 5y GIC at 4%+ is still a juicy rate and may not reach 5% as quickly as one hopes.

FIs are offering juicy fixed rates rather than HISA as they need more certainty in funds this time. Their treasury heads realizes HISA which is essential floating rate funding will not do well in current environment. This is not the same as saying "they expect rate to go a lot higher" tho.

AllanB said
Wall Street is already working on changing the narrative to "recession is worse than inflation" to keep rates down.  

There are mixed signals coming from the US:

"Federal Reserve Governor Christopher Waller said Monday he sees interest rate increases continuing through the rest of the year as part of an effort to bring inflation under control."

My take. In the US, the ruling party has a deadline: November. They need to get inflation under control by November midterms.

Sadly, no such problem in Canada. Which means, BoC will either follow the Fed lead, or perhaps will slow down with rate increases after June 1st, which could keep inflation high and will weaken Canadian dollar.
If we start seeing articles in Canadian pro-government media praising weak dollar as good for economy, exports, employment - that is the sign BoC will not be dealing with inflation they way they should.

Canada will do what the US does and have a higher rate or the dollar will crash. As the US feds go so will we.

agit said

BOC will Always copy the Fed reserve

. . .   

"Always"❓ ... Not according to your chart above ⬆ (e.g. 2000, 2004, 2012).

However, over-time the BoC & Fed will be 'Similar', as our economies are so closely tided together.

Suggestion:
It's best to use the word 'Always', sparingly.

Dean

cgouimet said

And the last BoC .5% increase was followed BY the Fed ...  

But the BoC will not want to go too far from the Fed so as to not create an Cdn/US $ exchange imbalance ...

savemoresaveoften said
There is a close enuf correlation between a Fed and a BoC move that the word "always" is most of the time appropriate.

ok, lets use "most of the time" instead of "always" to please the English majors 🙂

This time the BoC will again shadow the Fed move, nothing has changed. Those conspiracy theory that the BoC always please the investors, save the house owners blah blah are just drinking some cant be described color of koolaid. Maybe its coolant that the person is drinking giving them hallucination  

Poilievre Kool-Aid ...

MattS said

I’m asking this sincerely not starting an argument… If it’s not to save housing or investors maybe it’s for other reasons too but I’ll tell you why I got my opinion… During Covid at some point … can’t give exact date but FI were starting to compete for deposits. Tangerine of all people had the highest avail rate at 3.2% which lasted approximately two days..rates in general started then dropping from desperation to no need of my funds. all you could get out of them was the situation has changed.. a friend whose opinion I respected mentioned that the government and BOC was flooding them with free money to artificially suppress real free market rates.. one google search at that time plenty of quotes from BOC and govt about “bloating their balance sheets” to “help”
The sudden lower interest rates being offered to me coincided with these announcements literally to the day… so now my opinion is things are manipulated and I was literally thinking I belonged to free markets when in fact I was against the BOC and my govt. I was not allowed to take my 3.2% and had to settle at getting screwed out of 33% of my anticipated rate. If you have any insight on that I would
Love to hear it and love to know if anybody on this board has any indicators as to when these situations may occur again. This is why I’m cautious about waiting till rate peak and first qtr point reduction . I’ll gladly take a qtr off peek but as I’ve found out my rate could get chopped 33% over night just as it was with tangerine. And BTW funds were in xfer mode but did not hit my account so they weren’t having it!  

At the time, tangerine panic and offered a rate they should not have, as simple as that. No different from when retail investors just sell everything causing a crash like during the panic days of financial crisis or early days of Covid.
At the time if CB and govt didnt intervene and let free market works it’s way out, there may not be much of market to discuss about today. Look at how many years for Great Depression to bounce back. Govt and CB job is to prevent market from a total collapse/destruction and it has done its job.