BOC HIKE ODDS AT 81% AS CAD AWAITS MACKLEM’S NEXT MOVE
The Bank of Canada (BoC) is expected to announce its policy decision on Wednesday, with an approximately 81% chance of a 25 basis point hike to 2.50%, according to investingLive. If delivered, it would be the bank’s first rate increase in a year, although some economists remain unconvinced the move is warranted.
Expectations have shifted rapidly. Governor Tiff Macklem told reporters the bank’s quarterly inflation projections, due alongside Wednesday’s decision, are likely to be revised higher, which markets read as a signal of tighter monetary policy. A Reuters poll conducted from October 21–23 found that 19 of 34 economists expect a hike this week, while a majority anticipate another increase by the end of March 2027, taking the policy rate to 2.75%. In the previous poll, 80% expected rates to remain at 2.25% through the end of 2026.
HSBC points to rising long-term consumer inflation expectations, even as other hard economic data have been on the soft side. TD remains less convinced that a rate increase is warranted, citing limited breadth in inflation and uncertainty over the near-term outlook. Some economists argue that energy-driven price increases are unlikely to feed through to underlying inflation on their own, while the bank could still tighten if price pressures broaden.
For USD/CAD and Canadian Dollar markets, the decision may depend more on the accompanying Monetary Policy Report and forward guidance than on the rate decision itself. According to investingLive, a hold would be a sizeable surprise, likely sending the Canadian Dollar sharply lower. A hike signalling further tightening would support the currency, while a cautious “one and watch” message could see market pricing for a follow-up move by March trimmed.
The BoC decision and accompanying Monetary Policy Report are due at 09:45 ET (13:45 GMT) on Wednesday. August GDP data is due on Friday.
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