Do BoC’s signals pressure U. S. Fed?

Short term U.S. Treasury yields leapt higher Wednesday after the Bank of Canada shut down its QE program and signaled for an early 2022 interest rate hike only some days before November’s awaited Fed policy meeting.


Treasury yields jumped higher Wednesday, pushing major stock indices into the red zone, after the Bank of Canada’s decision to end its bond-buying program and signals of an early interest rate hike amid surging commodity prices and stubbornly persistent inflation.

The Bank of Canada held its key lending rate unchanged at 0.25% following a policy meeting in Ottawa, but stressed that inflation will not ease back towards its central target range of between 1% and 3% until at least late next year, partially because “the larger and more lasting impacts from supply constraints as well as higher energy prices”.

Rate hikes will likely occur in the ‘middle quarters’ of 2022, around three months earlier than indicated in BoC’s July forecast. Quantitative easing will end on 1 November.

The BoC’s measures come only days before the U. S. Federal Reserve’s November policy meeting, during which it is expected to begin slowing the pace of its $120 billion in monthly bond purchases – the first of several steps required to begin hiking rates next year.