🏦🇨🇦 Expect A 25Bps BoC Hike Next Wednesday: Scotiabank

Pricing for next week’s meeting was unchanged at about 18bps of a hike post-CPI after reacting to Governor Macklem’s weekend comments. Canada 2s shook it off and remain the worst-performing front-end among the majors this morning. CAD barely flinched, depreciating a quarter cent post-data but was also probably influenced by volatile WTI.

We forecast the Bank of Canada will hike 25bps next week.

It’s not a slam dunk call but there is probably enough supporting evidence for a hike. BoC Governor Macklem sounds like he’s fading backward looking data in favour of a higher forward-looking inflation forecast and higher inflation risk. The BoC looks at trends, not spot data anyway. If a hike is significantly priced, then they’re likely to deliver one since easing financial conditions by whiffing would be tough to justify. They struck out “appropriate” reference to the policy rate last time presumably as a warning, and the warnings on forward-looking inflation risks have been consistently pointing to raising the forecast and being increasingly concerned about upside risk. - Scotiabank