BoC is today and almost no one thinks they’ll move, see market exps derived from curve below
BoC expectations for a hike are:
0% priced for today
15% priced in for Jul19
17% priced in for Sep7
28% priced in for Oct25
35% priced in for Dec6
It seems to me that the curve is a little low based on our house view thet the BoC will move in July and in fact if they do set a move in today’s statement we should see a decent sell-off in the front end
a quick preview from our econ group in TO is below
Canada BoC rate announcement – 14:00 BST/09:00 EDT
We expect no change in the target overnight rate. But we do expect to see the forward-looking language take on a firmer tone. CPI is running above the BoC’s control band of 1%-3% and while there is a tendency at the BoC to view the
rise in CPI as both transitory and a function of externalities, we would instead focus on the latest Bank of Canada business outlook survey that reflected a significant rise in respondent’s outlook on inflation. With the output gap set to close in a little more than 12 months, according to the
central bank’s own estimates, we believe the Bank will run a policy in keeping with an economy operating at full capacity. At 1.00%, the overnight rate remain at emergency levels and a move towards a more neutral rate posture in keeping
with an output gap set to close would be desirable.
We are looking for the Bank of Canada to begin raising rates at the July policy meeting and expect the language of today’s post-meeting statement to adopt a tone in keeping with this view.
Last Median Forecast
Rate 1.00% 1.00% 1.00%
HSBC Global Research