Bank of Canada seen hiking rates to 2.50% on Wednesday, first move in a year

A Reuters poll taken between October 21 and 23 showed 19 of 34 economists now expect a rate increase this week, with most also forecasting another hike by March 2027 that would bring the rate to 2.75%. That is a reversal from the prior survey, in which 80% of respondents had expected the bank to stay at 2.25% through the end of 2026.

The shift followed comments from Macklem, who told reporters the bank’s upcoming quarterly inflation projections are likely to be revised upward. Futures pricing for an October move reportedly jumped from around 30% before his remarks to near 75% afterward, prompting several economists to switch their calls to a hike.

HSBC analysts pointed to survey data, particularly rising long-term consumer inflation expectations, as evidence supporting a hike even though harder economic indicators have been softer. TD analysts took the opposite view, saying they do not share the market’s confidence in a rate rise given narrow inflation breadth and uncertainty over the near-term path. Some observers have also noted that energy-driven price gains alone may not be enough to lift underlying inflation, while earlier labour-market weakness had previously pushed expectations for a hike toward December.

The Bank of Canada will announce its decision alongside the Monetary Policy Report at 09:45 ET (13:45 GMT) on Wednesday. August GDP data follow on Friday and could provide an early check on the central bank’s updated guidance.

With a hike largely priced in, the direction of the Canadian dollar and short-term Canadian yields is likely to hinge on the tone of the Monetary Policy Report rather than the decision itself, with oil prices an additional factor that could reinforce or soften the inflation outlook.

Source: investingLive