BoC: All set-up to raise rates - AmpGFX

On Wednesday, in a CNBC interview, in Sintra, Portugal, while attending the ECB forum on central banking, Bank of Canada Governor Poloz made comments that significantly raised expectations for a hike at the next BoC meeting on 12 July, according to the research team at Amplifying Global FX Capital.

Key Quotes

“The ECB gathering of central bankers has generated several more hawkish comments from central bankers, including the BoE and ECB.”

“The market was blind-sided by a speech by Bank of Canada Deputy Governor Wilkins on 12 June that shifted the BoC to a clear tightening bias.  Since then 2yr Canada rates and the CAD have been rising. Poloz gave this move more juice.”

“On Wednesday, Poloz responded to a question on “room for rate hikes to come?”, saying, “Well rates are of course extraordinarily low and we cut them by 50 basis points in 2015 to counteract the effects of the oil price shock speed up the adjustment. It does look as though those cuts have done their job. But we’re just approaching a new interest rate decision so I don’t want to prejudge. But certainly, we need to be at least considering that whole situation now that the capacity excess capacity is being used up steadily.”

“This suggests that 12 July is a live meeting, and the PMC needs to “at least be considering” a hike.”

“The BoC has characterized the last 50bp of cuts in 2015 as designed to deal with an oil price shock.  The evidence suggests that the shock has past and the economy is back on track.  As such, there may be a relatively low hurdle for the BoC to remove those two 25bp cuts.”