Transcript: How fast will Canadian rates rise?
Chief Economist, CIBC World Markets
One nice feature about where we are now is, because there are some other headwinds to growth, we may not see the central banks have to get all that tough on interest rates. So there are a lot of Canadians who have mortgages coming due over the next three, four, or five years and are rightly concerned that those mortgages are going to be quite a lot more expensive than the one they had from three, four years ago coming due. And the Bank of Canada is certainly talking about raising interest rates ahead. But if we do, for example, see the US economy slowing, that's going to provide some slowing impact on Canada. We may only need another half a percent or so rise in interest rates in Canada. So yes there are further interest rate hikes coming but they could end up being at least a gentle hand in terms of the hit that implies to the average Canadian household.
Canadian dollar outlook
We always advise Canadians to think about, as they do their investment planning, where they're going to spend their money in retirement. Many of us have thoughts of being in Florida or spending some money in warmer climes during the winter. That typically involves a need for US dollars, so as a base it's always worth thinking about having a portion of your money in US dollar investments. Canada really hasn't been doing all that well on the export front. To me that suggests that we can't really live with a much stronger Canadian dollar than we already have. So we're generally relatively neutral on the Canadian dollar. We can strengthen when oil prices go up or there's good news on trade negotiations and things like that. We can weaken if some of those things weaken, but generally speaking I think we're hovering in a range right now and you need to take the opportunity when the Canadian dollar strengthens to perhaps beef up your U.S. dollar investments, start saving that nest egg for the U.S. dollars you're going to be spending in retirement.
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