BoC: Chance of Oct 25 rate hike appears slim – Westpac

Richard Franulovich, Research Analyst at Westpac, suggests that BoC Gov Poloz delivered a frustratingly inconclusive signal on near term prospects for a rate hike noting, “monetary policy will be particularly data dependent,” amid a multitude of uncertainties on the economy.

Key Quotes

“Poloz also notably singled out financial markets for special mention too, suggesting further meaningful gains in $C will enter the BoC’s reaction function.”

“The chance of an Oct 25 rate hike appears slim and with a good 30% priced in, CAD is still vulnerable.”

“But against that, the Trudeau fiscal stimulus of 2016 continues to wash through the local economy, US growth prospects are firming amid very easy financial conditions and oil prices have hit multi month highs.”

“Near term rate hike chances have taken a hit but on a 12 month horizon the BoC could easily deliver another 2-3 hikes. USD/CAD can bounce to 1.26/1.27 where it might peak.”