Six Canadian banks manipulated an interest rate benchmark, United States lawsuit alleges

Chelsea West
January 18, 2018

The Bank Rate is correspondingly 1 1/2 per cent and the deposit rate is 1 per cent.

The Bank of Canada has once again raised the central bank's benchmark interest rate by a quarter of a percentage point to 1.25 percent.

The central bank said it expects real GDP growth to slow to 2.2% this year and then to 1.6% in 2019, after a projected 3% growth in 2017.

Exports have been weaker than anticipated, but are still expected to contribute a larger share of Canada's growth, the bank said.

The central bank estimates the economy grew 3% a year ago, and is expected to expand 2.2% in 2018.

The central bank's rate in turn affects rates that Canadians get from their retail banks for things like mortgages, credit lines, savings accounts and Guaranteed Investment Certificates (GIC).

The price of oil, one of Canada's major exports, rose ahead of the release of USA petroleum data that was expected to show a ninth straight weekly drawdown in crude inventories.

The Bank of Canada today increased its target for the overnight rate to 1 1/4 per cent.

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Underlying economic fundamentals at home and overseas have strengthened, and would otherwise suggest a strong pickup in business investment and exports, the bank said. Trade-policy uncertainty is expected to hold back exports by 0.7% by 2020, the bank said. However, as uncertainty about the future of NAFTA is weighing increasingly on the outlook, the Bank has incorporated into its projection additional negative judgement on business investment and trade. The consensus calls for three modest rate hikes in 2018.

"Recent data have been strong, inflation is close to target and the economy is operating roughly at capacity", the bank said in the announcement.

Given high household debt levels, the unknown impact of tighter stress tests for uninsured mortgages that came into effect this year and uncertainty surrounding NAFTA renegotiations, the bank must be cautious about how quickly it raises rates in order to avoid derailing the economy.

As for trade, the central bank said the Nafta risk would hinder Canadian exporters' ability to benefit from an improving global outlook.

The bank expects inflation to remain around 2 per cent in the months ahead.

The claim alleges the banks suppressed the rate by making artificially lower interest rate submissions to Thomson Reuters, which calculates the CDOR daily.

Poloz raised rates in July and September in response to a surprisingly strong economic run that began in late 2016.

David Rosenberg, chief economist Gluskin SheffThose who had been forecasting three more moves this year did not receive much reassurance in what was a fairly dovish press statement.

Other reports by TheSundaySentinel

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