With inflation running at the fastest pace in decades and poised to accelerate further, the BoC has little choice but to aggressively push rates at least into neutral territory..."the Governing Council is prepared to act more forcefully if needed." That phrase introduces the risk of a 75 bp hike at the next meeting in July, though such a drastic move would likely need to be accompanied by another unexpected acceleration in inflation. The Bank of Canada is focused on maintaining its credibility, and ensuring inflation expectations remain anchored. With inflation poised to rise above 7% in the next print, the risks to expectations are skewed to the upside as well. Don't expect the hawkish rhetoric to let up until inflation starts to trend lower. We continue to look for another 50 bp hike in July, but there's a risk of a 75 bp move if inflation surprises to the high side yet again. - BMO Capital Markets Chief Economist
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