fxs_header_sponsor_anchor

News

BoC Preview: Forecasts from eight major banks, edging towards a final rate hike

The Bank of Canada (BoC) is set to announce its interest rate decision on Wednesday, January 25 at 15:00 GMT and as we get closer to the release time, here are the expectations as forecast by the economists and researchers of eight major banks, regarding the upcoming announcement.

The BoC is set to deliver a 25 basis points (bps) hike, lifting the policy rate from 4.25% to 4.25% in what could be its final round of tightening.

Standard Chartered

“We now expect the BoC to raise the policy rate by 25 bps to 4.5%. We expect the BoC to be careful about signalling future hikes while not precluding them. This is largely in line with market expectations, so we do not expect a big CAD reaction. The CAD could fall if BoC Governor Macklem signals that the BoC hiking cycle is over, but we think he will most likely indicate that the hiking cycle is close to a peak, and not rule out future hikes in case they are needed.”

NBF

“The billion-dollar question is: Is inflation normalizing quickly enough? We think it is and we are very cautiously optimistic they’ll agree. As such, we are officially forecasting a ‘no change’ decision but we are not dismissing that there are valid reasons to expect the BoC to pull the trigger.”

ING

“The BoC is getting close to the end point of its interest rate hiking phase. Inflation is showing signs of coming off, but the jobs market remains hot and as such we expect a final 25 bps interest rate hike. The BoC will likely characterise this as a pause, but we expect it to mark the peak as global recessionary forces are increasingly felt within Canada and inflation numbers continue to subside.”

TDS

“We look for the BoC to hike by 25 bps and we expect this will be the last hike this cycle (though the forward-looking component will not preclude future hikes). While this is expected to be the last hike, the CAD may not receive much directional bias from this meeting as the curve may continue to be biased about looking at the other side of this interest rate cycle. That said, the CAD may be more sensitive to any dovish elements should the BOC emphasize elements from the BOS. We see a differentiated dynamic playing out on the crosses given risk correlations.”

RBC Economics

“Canada’s central bank is expected to slow the pace of interest rate hikes. And odds are that the 25 bps increase we anticipate (down from the 50 bps increase in December) could be the last of this hiking cycle. An unexpected surge in employment in December and a decline in the unemployment rate to a near record low of 5% is the main reason we expect the BoC to follow through with one final rate hike. Still, interest rates are likely high enough now that labour markets will soften in 2023.”

Citibank

“We expect another 25 bps hike to 4.50% with the updated policy statement likely to describe both growth and the labor market as having evolved somewhat stronger than expected, although with increasing concerns over softer activity as shown in the Q4 Business Outlook Survey. While there is a possibility that the BoC could show some preference for pausing rates and assessing how economic conditions evolve, we expect only very minor changes to guidance and their base case remains for another 25 bps hike in March, although highly data-dependent.”

CIBC

“The BoC is expected to deliver a further rate increase, albeit of a more modest 25 bps sizing. The statement will have to sound hawkish enough to justify the move, but look for indications from the following press conference that a pause will be seen from here and the conditions that the Bank eventually needs to see to start cutting interest rates again.”

Wells Fargo

“Recent activity data have been mixed, suggesting an end to the central bank's tightening cycle may not be that far away. With core inflation yet to show a more meaningful deceleration, we believe that could be enough for the BoC to deliver one final 25 bps policy rate increase to 4.50%. We expect the policy interest rate to remain at that level through most of this year before the BoC begins cutting interest rates in the final quarter of 2023.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.


RELATED CONTENT

Loading ...



Copyright © 2024 FOREXSTREET S.L., All rights reserved.