‘A tale of two economies’: Interest rate policy in Canada and U.S. set to diverge

By Rosa Saba
The Canadian Press in The Toronto Star
June 12, 2024
Category: Finance & Economics
Region: Canada, United States

With monetary policy at the Bank of Canada and U.S. Federal Reserve on track to diverge, experts say it could set the Canadian dollar up for volatility down the road. If the Bank of Canada’s rate falls too far below the Fed’s, it could negatively affect the loonie, said Allan Small at IA Private Wealth. This would make imports from the US more expensive and put upward pressure on inflation, though this isn’t something that happens overnight. …The Fed is widely expected to hold its key interest rate steady on Wednesday as the country’s economy has been more resilient than expected in the face of higher borrowing costs and inflation. It’s a different story in Canada, where last week, the Bank of Canada announced its first interest rate cut in more than four years after a steep hiking cycle aimed at tamping down inflation.

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