Broadening Growth Key to Bank of Canada's Hawkish Shift: ChartBy
One reason for the Bank of Canada’s shift to a hawkish tone: the economy’s firing on more cylinders. A diffusion index shows 86 percent of key sub-industries tracked by the central bank have expanded on an annual basis as of April’s GDP data released on Friday. That share had fallen to as low as 64 percent amid the collapse in oil prices that elicited two rate cuts from the Bank in 2015, and has now recovered to its highest level since November 2014. The quarterly Business Outlook Survey also pointed to a “broad-based improvement” in business sentiment. Odds of an interest rate increase at the Bank’s July 12 meeting have swelled to about three in four, after Governor Stephen Poloz, Senior Deputy Governor Carolyn Wilkins, and most recently Deputy Governor Lynn Patterson referenced this trend in remarks over the past three weeks.