On Wednesday, the Bank of Canada will announce its decision on monetary policy. Analysts at Rabobank expect at rate hike of 75 basis points to 4%. They see it as the last hike of 75 bps, before returning to a 50 bps increase at the next meeting on December 7.
“We expect the Bank of Canada to raise rates another 75bp on Wednesday, October 26th, taking the policy rate up to 4.00%. Canada has not felt interest rates that high since the beginning of 2008, after rates had been cut 50bp (two 25bp) from the 4.50% peak in 2007.”
“Given the divergence of views heading into this meeting, we are likely to see significant repricing of the curve and FX volatility in the aftermath of the decision. This will be compounded by the release of a new Monetary Policy Report and all the projections within, and volatility won’t end there given that Governor Macklem will hold a press conference an hour after the decision. In short, this week’s decision could prove a lively one for BoC watchers and CAD traders.”
“In terms of the Bank’s forecasts, expect upward revisions to inflation and downward revisions to growth. At Rabo, we expect GDP growth of 1% in 2023 and CPI inflation of 3.4% by 2023 yearend, with risk skewed to lower growth and stickier inflation.”
“We remain of the view that USD/CAD will trade north of 1.40 before the end of this year.”
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