🏦🇨🇦Cable FX Macro Weekly Note: Bank Of Canada Oct. Meeting

**As seen in Risk In The Week report 10/21/22, subscribe at cablefxm.co.uk/reports

The Bank of Canada slowed down the pace of hikes in September after it raised the overnight rate by 75 basis points to 3.25%, this followed a 100 basis point move which left the central bank among the most aggressive in the G10. The BoC reiterated that it would need to keep raising rates given the fast moves in prices and as they attempt to achieve stability towards the inflation target. Also, the BoC noted that indicators point to strong domestic demand, however, they expect the economy to moderate on the back of global weakness and as it digests higher rates. Moreover, excluding gasoline, inflation pressures seem to be broadening, they noted that there is a persistent risk of CPI expectations becoming entrenched, on this, the BoC said that surveys point to short-term inflation expectations remaining high. For these reasons, BoC concluded rates needed to keep heading higher, as a reminder, the bank has already delivered 300 basis points of tightening and some desk penciled the pace could be reduced into year-end. Recently, we received the BoS and the September CPI reports, the latter showed headline prices printing at 6.9%, higher than market expectations, the core measures averaged 5.3%. The desk at Goldman Sachs has upgraded its view on the October meeting, it now sees a 50bps hike, up from the prior expectation of 25bps. They note that the BoC is set to deliver its MPR, and that this would come with a more cautious tone on the outlook. Goldman also said that the CPI report did not show a sharp drop in underlying inflation, this leads them to see risks of a 75bps move by the BoC. Analysts at Scotiabank say that if the BoC were to deliver the three-quarter point move, it would be hard to imagine them slowing down to 25bps next.