Canadian stocks rise after BoC trims policy rate

The Bank of Canada (BoC) reduced its key policy rate from 5% to 4.75% on Wednesday in a widely expected move that should ease pressure on highly indebted borrowers and become a positive factor for Canadian stocks.

This is the first rate cut in four years. After keeping interest rates at a more than two-decade high of 5% for almost a year, the BoC said the indicators for underlying inflation looked increasingly positive.

Reuters quoted Greg Taylor, chief investment officer at Purpose Investments, as saying “The Canadian economy is slowing. There’s definitely some stress in the system and we’ve really had the inflation return towards their (BoC) target level. It’s good news as it’s the right direction for the economy and the markets.”

BoC’s governor Tiff Macklem stressed the timing of the next cut would depend on whether inflation continued its downward trajectory and the economy evolved in line with the bank’s expectations. According to Reuters, the swap market data today showed a 60% chance of the Canadian central bank cutting rates further in July.

Toronto stocks climbed on Wednesday after the Bank of Canada’s decision. At the end of the day, the Toronto Stock Exchange’s S&P/TSX composite index grew 0.76%, to 22,145.02.

Canadian dollar weakened 0.2% to 1.3711 per U.S. dollar after the rate cut, while Canada’s 2-year yield fell 8.3 basis points to 3.973%.

Michael Zienchuk, MBA, CIM
Investment Advisor, Credential Securities Inc.
Manager, Wealth Strategies Group
Ukrainian Credit Union
416-763-5575 x204
[email protected]
www.ukrainiancu.com

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