As illustrated, money markets see greater than 80% odds of no changes to the bank’s overnight rate for the remainder of this year. But it now sees greater probabilities that there will be a hike rather than a cut.
Inflation hasn’t been running this slow since 2021, but that’s still not enough to satisfy Canadian central bankers who are laser focused on returning price growth to its 2% target. ... The slowdown in the year-over-year rate was the result of base effects, with a very large monthly increase falling out of the annual calculation.
Markets are no longer pricing in rate cuts in Canada this year and have opened the door to further hikes in the near term. However, with the recent global banking system stresses unexpectedly tightening financial conditions, we think rate hikes are now a thing of the past and cuts will begin around the turn of the year.