What the U.S. Fed Hiking Rates Means for the Loonie and Borrowers
The U.S. Federal Reserve hiked interest rates for the first time in three years on Wednesday, and several economists say this could add pressure on the Bank of Canada. The move is expected to affect the Canadian dollar, known as the loonie, and Canadian borrowers.
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Take
When the Fed hikes rates, the Bank of Canada often faces a difficult dilemma: follow suit to defend the loonie, or keep rates lower to support domestic economic growth.
Pushback
But given Canada's exceptionally high household debt-to-income ratio, even a symbolic divergence in monetary policy can heavily impact borrower confidence and market expectations.