The Canadian Cointoss: Bank Of Canada Monetary Policy Decision Preview
From RanSquawk
- The majority expects the BoC to leave its overnight rate unchanged at 0.75%. Only 6 of 33 surveyed expect the BoC to hike this time out, while the OIS curve prices in a 45% chance of a hike.
- A strong Q2 GDP release and the ensuing solid handover to Q3 has put a hike on the table at the upcoming decision.
- Many are still cautious regarding further hikes owing to a lack of inflationary pressure.
The majority expect the Bank of Canada (BoC) to leave its overnight rate unchanged at 0.75%. Only 6 of the 33 surveyed in the latest Reuters poll are looking for a hike at the upcoming meeting, while 24 expect the BoC to hike at its October meeting. The remainder expect the next hike to come in January. Markets are more aggressive following a strong June retail sales release and impressive Q2 GDP release (4.5% on a QQ annualised basis, which was above the top end of expectations). Swaps are currently pricing in a circa 45% chance of a hike this week (odds stood at circa 20% pre-GDP), with an October hike baked into the curve.
July’s decision saw the BoC raise rates for the first time in 7 years after a slew of central bank rhetoric paved the way for the hike in the weeks running in to the decision, although the initial change of tone caught both markets and economists off guard. The hike still caught some unaware, as many still believed that the central bank lacked evidence of notable inflationary pressure, with the BoC’s 3 core measures all tracking below 2%.
July’s decision was accompanied by the quarterly Monetary Policy Report (MPR) with the latest batch of projections available below.
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