What the U.S. Fed hiking rates means for the loonie and for borrowers
The U.S. Federal Reserve's recent interest rate hike is putting pressure on the Bank of Canada to potentially raise its own rates. Economists warn that this could lead to higher borrowing costs for Canadians and impact the value of the loonie.
Why it matters
Monetary policy shifts in the U.S. have significant ripple effects on the Canadian economy, specifically regarding inflation and consumer debt.
The U.S. Federal Reserve hiked interest rates for the first time in three years on Wednesday , and several economists say this could add pressure on the Bank of Canada to raise borrowing costs for Canadians sooner than later.
Canadian borrowing rates aren’t directly tied to changes made by the U.S. Fed, but there are some ripple effects, including changes to the loonie, which could influence future changes.
Derek Holt, economist and vice president at the Bank of Nova Scotia, said in a statement on Wednesday that he would be surprised if the U.S. rate hike doesn’t “add one more ingredient to pave the way” for Bank of Canada Governor Tiff Macklem to begin hiking soon.
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