How High May Be Rate Hike By Bank Of Canada? | Japan GDP Ahead

Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

On Wednesday, two goposaraku may catch the attention of investors. The Bank of Canada will announce its monetary policy decisions and Japan will announce its GDP data.

Bank Of Canada’s decision

The Bank of Canada is expected to conclude a historic year marked by high inflation and aggressive monetary policy tightening with one more interest rate hike on Wednesday.

In the wake of inflation soaring this year, the Bank of Canada has raised its key rate six times in a row since March in a race to curb inflation expectations before they are no longer anchored.

After raising the main interest rate by a historical full percentage point in July, the Bank of Canada limited the scale of interest rate hikes.

Forecasts call for the central bank to raise its key interest rate, which is currently 3.75 percent, by a quarter or a half of a percentage point.

After raising its key rate by a historic full percentage point in July, the Bank of Canada has tapered the size of its rate hikes. In September, it announced a three-quarter percentage point rate hike, followed by half a percentage point in October.

Now, the end of the rate hike cycle appears to be near.

Canada’s economy grew more quickly than expected in the third quarter. Statistics Canada announced that Canada’s gross domestic product grew at an annualized rate of 2.9 per cent in the quarter. But preliminary October data released by Statistics Canada at the same time showed that the economy didn’t grow at all that month. That could give the Bank of Canada a reason to dial back its rate-raising campaign.

That shows the Bank of Canada’s rate hikes are already having a significant impact on Canadian households ability to spend money.

Japan GDP

The world’s third biggest economy has struggled to motor on despite the recent lifting of Covid curbs, and has faced intensifying pressure from red-hot global inflation, sweeping interest rate increases worldwide and the Ukraine war.

The unexpected decline reflects the impact of the Japanese currency on the economy and shows that the road to a sustainable post-pandemic recovery is long, with further risks clouding the outlook.

Politicians will be hoping the government's latest economic stimulus package will help boost growth in the coming months. The reopening of Japan's borders also creates the prospect of a renewed increase in the spending of foreign tourists attracted by a country that has become much cheaper to travel around.

The Bank of Japan maintains the view that the economy needs further support and that inflationary pressures require robust wage growth for price increases to be sustainable and beneficial to the economy.

To ease the impact on households and businesses, Prime Minister Fumio Kishida last month proposed an economic stimulus package that includes help to cut energy costs and cash benefits for childcare.

Japan's gross domestic product quarter-on-quarter in Q3 is expected to be the same as November's reading, i.e. it will stay at -0.3%

How High May Be Rate Hike By Bank Of Canada? | Japan GDP Ahead - 1

Source: investing.com

The economy fell in the third quarter for the first time in a year. GDP fell by 1.2% y/y. Typical suspects were the factors driving the decline in GDP - weak global growth and rising inflation, plus a weak yen. The GDP Y/Y result is now expected to reach a horizontal -1.1%.

Source: investing.com, boc.com

Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

Kamila Szypuła

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Kamila has a bachelors degree in economics and a master's degree in finance and accounting, specializing in banking and financial consulting

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