Investors, looking past the COVID-19 pandemic, are betting that the Bank of Canada could be among the first major central banks to hike interest rates, signaling new governor Tiff Macklem's success so far convincing the market not to expect negative rates.
TORONTO - Investors, looking past the COVID-19 pandemic, are betting that the Bank of Canada could be among the first major central banks to hike interest rates, signaling new governor Tiff Macklem’s success so far convincing the market not to expect negative rates.
The Federal Reserve, which has been pressured by U.S. President Donald Trump to cut rates below zero, is not expected by money markets to hike until at least 2023. After the Bank of Canada slashed interest rates in March to a record low of 0.25%, speculation mounted that it would join central banks in Japan and Europe in setting rates below zero.
Some economists argue the experience of Europe and Japan shows that negative rates are not effective at boosting economic growth. Alternatives for the Bank of Canada if it needs to add stimulus include adding to the size of its bond-buying program.
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