The Federal Reserve raised interest rates by a quarter of a percentage point on Wednesday, as anticipated, but left its rate outlook for the coming years unchanged even as policymakers projected a short-term acceleration in U.S. economic growth.
The move, coming at the final policy meeting of 2017 and on the heels of a flurry of relatively bullish economic data, represented a victory for a central bank that has vowed to continue a gradual tightening of monetary policy.
With the U.S. economy cranking out jobs and stock markets on a tear after congressional tax cuts, many experts are watching what the U.S. central bank chief says about how many more interest rate increases there will be in the coming year.
Most expect three quarter-point rate hikes in 2018. Others say it could be four. A few have suggested more.
In a tight spot
In any case, keeping up with the Fed could put a strain on the Canadian economy.
“You know, the Bank of Canada is in a tight spot,” says Rochon. “The biggest constraint on the Bank of Canada right now is the high debt levels of Canadians. You raise those rates a third time, a fourth time, a fifth time and that’s going to have a real drag on the economy.”