Canadian Economic Growth to Spur Early Rate Hike?

Here we go again. The Canadian dollar is rapidly approaching parity with the US variety.

Canadian Dollar Rally

In the last five trading days, Canadians have collectively grown almost 4% richer compared with their slovenly southern neighbors. Over the last 12 months, the loonie is up 22% versus the greenback. At this rate, we won’t be able to tell people when we head off for Vancouver: “Canada, it’s just like the US…only less.”

Add in the hockey game on Sunday…then the following nugget… Canucks have earned some bragging rights this week. But they won’t. From our experience, they’re always so…friendly.

The Canadian economy expanded at its fastest pace since 2000 last quarter, its government reported yesterday. As measured by the funny little statistic known as GDP, the economy expanded at an annualized rate of 5%, beating the Bank of Canada’s projections by nearly two full percentage points.

Unlike in the US, growth in the great white north was relatively broad. And now with several quarters of expansion under their belt, there’s extra pressure on the Bank of Canada to start (gasp!) raising rates. Can you imagine? Banks willing to pay interest on savings again? What a world.

“Maybe the BOC will even raise rates earlier than it said it would,” notes Chuck Butler in The Daily Pfennig. “Raise them now, or next week or next month? I don’t think so. But before the summer sun is hot and the tall colorful cold drinks with umbrellas are prevalent around pools… I DO think so!”


Addison Wiggin
for The Daily Reckoning