TSX index declining due to pause in rates by Bank of Canada
2023.01.25 12:21
TSX index declining due to pause in rates by Bank of Canada
By Ray Johnson
Budrigannews.com – The Bank of Canada raised its overnight lending rate as anticipated, which resulted in a decline in Canada’s main stock index on Wednesday. However, the bank also stated that economic growth would stall through the middle of the year and hinted at a pause in its hiking cycle.
The Toronto Stock Exchange’s S&P/TSX composite index was down 164.23 points, or 0.8%, at 20,465.32 at 10:21 a.m. ET (1521 GMT), on track for its largest single-day decline in four weeks.
The Bank of Canada said it would likely pause to measure the impact of previous increases after raising its benchmark overnight interest rate by 25 basis points to 4.5 percent, the highest level in 15 years.
The Bank of China (BoC) was one of the first major developed-world central banks to begin raising interest rates last year, increasing by 400 basis points in nine months, an unprecedented rate.
“They did what the market expected. The only news is that they officially announced a pause, which makes sense because it’s a blunt tool.” Tom O’Gorman, director of fixed income at Franklin Templeton Canada, stated:
“They did comment that they are seeing signs that these hikes are slowing economic activity. Although it operates with a long lag.”
According to the bank’s quarterly Monetary Policy Report, growth this year will be stronger than anticipated in October but is expected to stall through the first semester.
When the decision to raise interest rates was made public, stocks briefly recouped their losses.
However, Microsoft’s (NASDAQ:) quarterly updates, which were downbeat, and plane manufacturer Boeing weighed on global stocks and Wall Street. Canadian National Railway (TSX:) led the decline of 2.4% in the industrials. Co fell 4.9% following the company’s prediction of lower 2023 earnings.
The rate-sensitive financial sector dropped 0.5 percent.
(NYSE) Shopify was a bright spot, increasing 6.1% following the e-commerce company’s pricing plan update.
