TORONTO — Strength in industrials and metals helped buoy Canada’s main stock index amid energy weakness Wednesday, while U.S. stock markets were mixed after the country’s central bank held interest rates steady.
The Federal Reserve held interest rates for the first time in 15 months, after raising it 10 times in a row, but made it clear more hikes were in the pipeline.
Fed Chair Jerome Powell said at a news conference that the bank is “strongly committed” to bringing inflation down to its two per cent goal.
“The process of getting inflation down is going to be a gradual one — it’s going to take some time,” he said.
The S&P/TSX composite index was up 24.69 points at 20,015.09.
In New York, the Dow Jones industrial average was down 232.79 points at 33,979.33.The S&P 500 index was up 3.58 points at 4,372.59,while the Nasdaq composite was up 53.16 points at 13,626.48.
The rate pause wasn’t a surprise for investors, but the central bank’s messaging was, said Michael Currie, senior investment adviser at TD Wealth. Instead of saying the bank may or may not raise rates in the future, the message was clear: rates will go up again in the near future, with the Fed signalling two more potential hikes this year.
“It was just an absolute fact,” said Currie.
The bank’s economic projections were more hawkish than many expected, with predictions that the benchmark rate will stay higher for longer.
“We want to see inflation coming down decisively,” said Powell.
With this latest development, any dwindling expectations of rate cuts in 2023 should be quelled, said Currie, as the bank has made it clear that the path to its target for inflation is a long one.
“The speed is changing a bit but the direction is still the same,” said Currie.
The central bank’s announcement came the day after promising data on inflation, and Wednesday saw producer prices lower than expected, said Currie.
But the central bank’s updated forecasts predicted higher economic growth in 2023 than previously indicated, as well as persistent core inflation.
Another rate hike is also possible in Canada after last week’s hike, said Currie.
“A week and a half ago, we weren’t even expecting a rate hike in Canada,” he said.
“Things have changed pretty quickly.”
The Canadian dollar traded for 75.20 cents US compared with 75.13 on Tuesday.
The July crude contract was down US$1.15 at US$68.27 per barreland the July natural gas contract was up less than a penny at US$2.34 per mmBTU.
The August gold contract was up US$10.30 at US$1,968.90 an ounceand the July copper contract was up four cents at US$3.87 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published June 14, 2023.
Companies in this story: (TSX:GSPTSE, TSX_CADUSD=X)
