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Bank of Canada holds steady with their interest rate, while the loonie rises

May 30th, 2018  |  Canadian Business

On Wednesday the Bank of Canada opted to keep their benchmark interest rate at 1.25%. The rate has been holding steading since min-January, however the bank did hint at a potential raise in July.

"No surprise here," TD senior economist Brian DePratto said in a commentary. "With the economy set to outperform the bank's earlier expectations … and signs of life in all sectors bar housing, economic conditions favour another interest rate hike.”

The next rate decision is set to be made on July 11th, and many are expecting it to raise as the Canadian economy is forecasted to surpass expectations. More will be able to be gleamed once Statistics Canada releases their latest report regarding the Canadian GDP.

Based off of these factors, the Bank of Canada hinted that a rise is imminent for July.

"The statement was much more hawkish than the market anticipated, especially after the early week global financial market gyrations," BMO economist Benjamin Reitzes said. "This is a clear warning shot that a July rate hike is solid possibility.”

As a result of a positive first quarter GDP, and an anticipated rate hike, the Canadian dollar rose in the foreign exchange. When the markets closed on Wednesday night the loonie was ahead by 0.82 of a cent at 77.64 cents US.