Canadian Market Moderately Higher After BoC Rate Decision, U.S. Inflation Data

(RTTNews) - The Canadian market is moderately higher Wednesday morning with investing digesting the Bank of Canada's interest rate decision, and reacting positively to tamer-than-expected U.S. inflation data.

The Canadian central bank has increased its target for the overnight rate to 5%, with the bank rate at 5.25% and the deposit rate at 5%.

Materials and real estate stocks are among the prominent gainers. A few stocks from technology, energy and utilities sectors are also up with notable gains.

The benchmark S&P/TSX Composite Index, which climbed to 20,045.24, is currently up 130.26 points or 0.66% at 20,008.82.

The central bank cited persistent underlying price pressures as the reason for its rate hike decision. While inflation has eased significant since last summer, the central bank noted the downward momentum has come more from lower energy prices and less from easing underlying inflation.

"With the large price increases of last year out of the annual data, there will be less near-term downward momentum in CPI inflation," the Bank of Canada said. "Moreover, with three-month rates of core inflation running around 31/2-4% since last September, underlying price pressures appear to be more persistent than anticipated."

The central bank has forecast that consumer price inflation will hover around 3% for the next year before gradually declining to 2% in the middle of 2025.

"This is a slower return to target than was forecast in the January and April projections," the Canadian central bank said.

Reiterating that it remains resolute in its commitment to restoring price stability for Canadians, the bank said: "Governing Council remains concerned that progress towards the 2% target could stall, jeopardizing the return to price stability."

Shares of Laurentian Bank of Canada are soaring 30% after the bank said it was conducting a review of its strategic options to maximize shareholder value. The bank said in a release that it does not intend to disclose further developments until the review is concluded.

The Montreal-based bank has been working through a three-year strategic plan it launched in late 2021 to modernize operations, including with the rollout of its first mobile banking app, as it looks to catch up to the offerings of other Canadian banks.

In the materials sector, Capstone Mining (CS.TO), Fortuna Silver Mines (FVI.TO), Endeavour Silver Corp (EDR.TO) and Equinox Gold Corp (EQX.TO) are gaining 6.5 to 8%. Iamgold (IMG.TO), First Majestic Corp (FR.TO), Lundin Mining (LUN.TO), First Quantum Minerals (FM.TO), Osisko Mining (OSK.TO) and Hudbay Minerals (HBM.TO) are up 3.5 to 6%.

In U.S. economic news, data from the Labor Department showed its consumer price index rose by 0.2% in June after inching up by 0.1% in May. Economists had expected consumer prices to climb by 0.3%.

Core consumer prices still increased by 0.2% in June after rising by 0.4% in May. Core consumer prices were also expected to rise by 0.3%.

The report also showed the annual rate of consumer price growth slowed to 3% in June from 4% in May. Economists had expected the rate of growth to slow to 3.1%.

The annual rate of core consumer price growth also decelerated to 4.8% in June from 5.3% in May. The rate of growth was expected to slow to 5%.