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Another rate hike expected in October


MONTREAL, Canada – The Bank of Canada’s efforts are starting to pay off. The economic slowdown seems to have begun in Canada and inflation is slowing. It is also true for the core inflation measures which are favoured by the central bank.

However, the overall price increase is still too high and there are some international factors that could put renewed upward pressure on prices such as the strong US dollar and tightening oil supply.

The scenario that the Bank of Canada will make another rate increase on October 26 still seems the most likely in this context.

The Canadian dollar still falling

The correction in commodity market prices and uncertainty weighed on the exchange rate. The Canadian dollar traded as low as US$0.73 at the end of September.

For more details on the movements of the Canadian currency, see the main article in this month’s Economic Letter.

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Business confidence hold steady

In the face of growing uncertainty, the level of business confidence was little changed and remains low. In September, the Canadian Federation of Independent Business (CFIB) Business Barometer’s long-term index was still above the 50 mark, but only slightly at 52.4.

An index above 50 implies that a majority of companies are optimistic about the future than the opposite.

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