The BoC meet today, their decision is announced at 1400GMT and it'll be accompanied by the July Monetary Policy Report


And, here's the latest, this one from Scotiabank. Its quite comprehensive, I've bolded some parts for my 'in a nutshell' version:

We now believe that the Bank of Canada's 12 July policy rate meeting is not just live, but tipped toward marking the Bank's first policy rate increase in seven years.

  • Over the course of June, the BoC's senior leadership has provided a cascade of statements that represent a radical shift in tone from earlier this year.
  • In response, on 14 June we moved our expectation of a first hike from 2018Q1 to October of this year on the basis of statements by Senior Deputy Governor Wilkins on 12 June and Governor Poloz on 13 June that Canada's adjustment to the last major oil price shock was complete and that the two 25bps cuts the Bank enacted in 2015 had "largely done their work".
  • Governor Poloz reiterated in ... interview at the ECB Forum that "those cuts have done their job" while at the same time dismissing some of his previous concerns about trade policy uncertainty and oil prices.
  • With three opportunities to do so, it is noteworthy that Poloz did not attempt to rein in the market reaction to Wilkins' speech-indeed he reinforced it.
  • ... Deputy Governor Lynn Patterson joined the chorus, noting that the "economic drag from lower (oil) prices is largely behind us."

On this basis, we now anticipate that the BoC will raise its overnight rate by 25bps in July, 25 bps in October, and a further 25bps in 2018Q1-thereby removing the 50bps of "insurance" that Governor Poloz implemented in 2015 and adding some insurance against upside risks as Canada's output gap closes.

Additional arguments for a shift in policy bias may include that trade policy risks emanating from the US such as a border tax or sharp NAFTA shock are judged to be much less material than was the case at the start of the year.

  • Further, job growth has been very strong over the past year, GDP growth has surpassed expectations compared to last autumn in no small part due to ongoing consumer strengths and investment is rebounding.
  • Also key is that fear of an imported bond market shock through deficit-financed US stimulus has been reduced as financial market conditions have proven easier than feared.

In the meantime, CAD's appreciation has arguably been for sound reasons versus tightening financial conditions.


Of course, monetary policy transition points always involve risks and this time is no exception. It is possible that the BoC feels it is righting market pricing that had gone too far in favour of carefully delaying a hike until autumn instead of anticipating a move in July.

We believe that the sudden urgency associated with BoC communications well ahead of the July meeting implies that a rate increase is imminent.

  • If the BoC were simply setting up July for a rate hike later in the year then the shift in communications would not be so sudden.
  • Further, with core inflation not yet finding a clear bottom, wage growth still soft and following six years in which inflation has fallen short of the 2% inflation target, the BoC should likely proceed very cautiously.
  • The durability of domestic growth, continued frustration with export growth, a strained household sector and the risks posed by the delicate balance between markets and expectations for US fiscal stimulus all counsel additional caution.
  • We express this caution in terms of capping the sum total of expected rate hikes during 2017-18 at 75bps; we allow for the removal of emergency levels of stimulus re-introduced in 2015 and add one more hike to take out tentative insurance against upside risks given the economy's outperformance over 2016H2- 2017H1.