Bank of Canada hikes rates 100 bps vs 75 bps expected

• The overnight rate is now 2.50%
• Prior overnight rate was 1.50%
• Previous statement said "Governing Council is prepared to act more forcefully"
• Now says "Governing Council continues to judge that interest rates will need to rise further, and the pace of increases will be guided by the Bank’s ongoing assessment of the economy and inflation"
• Says "the Governing Council decided to front-load the path to higher interest rates"
• Inflation in Canada is higher and more persistent than the Bank expected
• Inflation likely to remain around 8% in the next few months
• More than half of the components that make up the CPI are now rising by more than 5%
• surveys indicate more consumers and businesses are expecting inflation to be higher for longer
• BOC now expects global economic growth to slow to about 3½% this year and 2% in 2023 before strengthening to 3% in 2024
• BOC expects Canada’s economy to grow by 3½% in 2022, 1¾% in 2023, and 2½% in 2024.
• BOC estimates that GDP grew by about 4% in the second quarter and sees about 2% in Q3
• Labour markets are tight with a record low unemployment rate
• Sees inflation at 3% by the end of next year and returning to the 2% target by the end of 2024
• Global energy prices are projected to decline
• Full statement

The market was pricing in a 24% chance of a surprise 100 basis point hike ahead of the release. USD/CAD was trading at 1.0025.

USD/CAD fell to 1.2980 but the 'front load' comment is a hint of a slowing pace of hikes or that the terminal rate hasn't changed.

For year end, the OIS market is now pricing in a year end rate of 3.74% from 3.60% beforehand. For September, the market is now split between 50 bps and 75 bps.

This is some serious tightening and I fear for the Canadian housing market, where prices are already dropping. USD/CAD CAD The Canadian dollar (CAD) is the official currency of Canada and at the time of writing is the fifth most-held reserve currency in the world behind only the US dollar, euro, Japanese yen, and British pound.The CAD is commonly referred to as the Loonie by forex analysts and traders. At the time of writing, the CAD accounts for 2% of all global currency reserves.Its appeal is strong among central banking authorities given Canada’s economic strength, sovereignty, and historic stability.Originally i The Canadian dollar (CAD) is the official currency of Canada and at the time of writing is the fifth most-held reserve currency in the world behind only the US dollar, euro, Japanese yen, and British pound.The CAD is commonly referred to as the Loonie by forex analysts and traders. At the time of writing, the CAD accounts for 2% of all global currency reserves.Its appeal is strong among central banking authorities given Canada’s economic strength, sovereignty, and historic stability.Originally i Read this Term traders were wise not to push the pair above 1.3050 yesterday even with energy prices falling. The Canadian 2-year note yield Yield A yield represents the earnings generated by an investment or security over a certain time period. Yields are typically displayed in percentage terms and are in the form of interest or dividends received from it.These figures do not include the price variations, which separates it from the total return. Consequently, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products.Yields can be calculated as a ratio or as A yield represents the earnings generated by an investment or security over a certain time period. Yields are typically displayed in percentage terms and are in the form of interest or dividends received from it.These figures do not include the price variations, which separates it from the total return. Consequently, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products.Yields can be calculated as a ratio or as Read this Term is at 3.41%, which is a nice spread over Treasuries at 3.17%.

BOC Governor Macklem will host a press conference at 11 am ET.