Affiliate Disclosure
Affiliate Disclosure adheres to strict guidelines to preserve editorial integrity to help you make decisions with confidence. Some of the reviews and content we feature on this site are supported by affiliate partnerships from which this website may receive money. This may impact how, where and which companies / services we review and write about. Our team of experts work to continually re-evaluate the reviews and information we provide on all the top Forex / CFD brokerages featured here. Our research focuses heavily on the broker’s custody of client deposits and the breadth of its client offering. Safety is evaluated by quality and length of the broker's track record, plus the scope of regulatory standing. Major factors in determining the quality of a broker’s offer include the cost of trading, the range of instruments available to trade, and general ease of use regarding execution and market information.

Bank of Canada Surprises with Rate Hike

The Bank of Canada surprised the markets when it unexpectedly raised interest rates by 25 basis points. The Canadian dollar posted modest gains on Wednesday and is in positive territory on Thursday.

Bank of Canada Raises Rates by 25 Basis Points 

The Bank of Canada (BoC) hiked rates by 25 basis points on Wednesday, bringing the benchmark rate to 4.75%, the highest level since 2001. This was a surprise, as the markets had expected the BoC to take a pause.

This marked the BoC's first rate hike since January when BoC Governor Macklem announced that it would "conditionally pause" its aggressive rate-hike cycle and monitor the effect of rate hikes on the economy. This was a fancy way of Macklem saying that each rate decision would be made based on data, in particular inflation, which has become a top priority for the BoC.

The BoC's "conditional pause" turned out to be quite short, as the central bank paused rates at only two meetings before raising rates yesterday. The move may have surprised the markets, but recent key Canadian data supports the BoC's decision. First, the April inflation report was higher than expected, rising to 0.7% month-to-month, up from 0.3% in March. Second, GDP hit 3.1% year-to-year in the first quarter, rebounding after a 0.1% decline in the fourth quarter of 2022. The BoC had forecast growth of 2.3% in the first quarter. 

With inflation and GDP higher than expected, the Canadian economy has not cooled down enough for BoC policy makers. The BoC rate statement pointed to the inflation and GDP reports as reasons for its decision to raise rates. The tone of the statement was hawkish and the markets have priced in another rate hike in July at 60%, with more hikes expected before the end of the year. There is no sure way to know what the central bank has planned in July, but a close examination of key data ahead of the July meeting should provide some guidance. If the Canadian economy doesn’t show signs of cooling, there is a good chance of another rate hike next month.

Global CPI is Falling, But Core CPI Remains a Concern 

The Bank of Canada noted that global consumer price inflation is coming down, due to lower energy prices, but core inflation remains higher than expected. Major central banks have signaled that interest rates may need to rise further in order to curb inflation, even though growth has slowed in the US, Europe and China. The BoC expressed concern that core inflation remains around 3½-4% and CPI inflation could become entrenched above the 2% target.

Stock Market Declines, Canadian Dollar Rises 

The Canadian benchmark stock market index, the S&P/TSX, declined while the Canadian dollar gained ground following the BoC rate hike.

The S&P/TSX fell 71.91 points at 19,983.69 at the close on Wednesday. 

The Canadian dollar rallied on Wednesday. USD/CAD opened at 1.3402 and fell as low as 1.3320 before paring most of these gains, closing at 1.3371. On Thursday, the Canadian dollar has edged higher and is trading at 1.3341 in the European session, up 0.22% on the day.

Kenny Fisher
About Kenny Fisher
Kenny started his career in forex working in the sales and marketing department at a major forex broker and has worked as a market analyst for 12 years. With a legal editing background, Kenny has combined his writing skills and finance expertise to produce top-quality articles. Kenny covers a wide range of topics, including global stock markets, commodities and currencies, with focus on fundamental and macro-economic analysis. Kenny’s articles have been carried by Oanda,, Seeking Alpha and FXStreet. Kenny holds a Bachelor of Law from Ogoode Hall Law School in Toronto, Canada.

Most Visited Forex Broker Reviews