BoC: Dealing with the CPI shock - TDS

Analysts at TD Securities point out that following the Canada’s July CPI release, markets now price a one-in-four chance of a September hike with October almost fully priced in.

Key Quotes

“The CPI surprise was entirely due to one-off factors, allowing the Bank to look through this release as their projections should not be significantly impacted. We continue to expect the next hike in October.”

“Significant inflation surprises are the norm in Canada, and that large downside misses are likely in the coming months.”

“Overall the Bank remains on a gradual path of rate hikes, but Poloz's data dependent regime may prove difficult for markets to price such a trajectory.”