Canadian interest rates

[The Kin]

I've read somewhere that inflation in Canada is higher than expected. Any idea how much higher interest rates may go?

Most were expecting rates to hit 4% in 2006. I'm willing to bet it goes higher - but would like more information first.

 

[Chagi]

Quote from The Kin:

I've read somewhere that inflation in Canada is higher than expected. Any idea how much higher interest rates may go?

Most were expecting rates to hit 4% in 2006. I'm willing to bet it goes higher - but would like more information first.

Okay well, Bank of Canada overnight rate is currently 3.50%, prime rates set by the big banks individually are at 5.25% (prime rate tends to be the reference rate for floating rate loans up here in Canada). If you visit the following link, you will see that the most recent reported CPI (total) was 2.80%, from what I heard the same number was far, far lower in the US today.

http://www.bankofcanada.ca/en/

We have rate announcements coming up in early March and late April, I pretty much guarantee that we will be seeing a 25bps increase both times. Beyond that, it's anyone's guess, but I suspect that we could easily see an additional couple of hikes during 2006. So my personal target is overnight rate of 4.25% to 4.50%, which would mean bank prime rates of 6.00% to 6.25%.

 

[The Kin]

^ Thanks. I'm thinking along those lines, too. It's great news for the Canadian dollar and energy stocks. Horrible news for Canadian manufacturers and the provinces of Ontario and Quebec. I'm gonna try and come up with a way to exploit.

 

[Chagi]

Quote from The Kin:

^ Thanks. I'm thinking along those lines, too. It's great news for the Canadian dollar and energy stocks. Horrible news for Canadian manufacturers and the provinces of Ontario and Quebec. I'm gonna try and come up with a way to exploit.

I'm interested to see what oil and gas are going to do over the next few months. I'm expecting some form of decline, which I think could lead to the Canadian dollar dropping a bit vs. the US dollar. Canadian energy stocks are also looking a bit shakey right now.