boc macklem

All six of Canada's major banks expect the Bank of Canada to hike rates this week so it's no surprise that Bank of America sees the same but what comes after that is a tougher call.

Bank of America Global Research discusses its expectations for this week's BoC policy decision.

"We expect the Bank of Canada (BoC) to hike the overnight rate by 50bp to put the rate at 1.00%, and to formalize its quantitative tightening (QT) program at the 13 April meeting. Several reasons support our view of a more aggressive BoC: (i) headline and core inflation above target and increasing inflation expectations; (ii) a tight labor market with the unemployment rate at its lowest level on record; (iii) a positive terms of trade shock from higher oil and other commodity prices; (iv) a hawkish US Fed, which will likely hike 50bp in May and start QT as well," BofA notes.

"We believe a hawkish 50bp hike and the official end of reinvestment will provide idiosyncratic support to bond yields and CAD this week. Going forward, we expect the BoC to hike by 50bp three consecutive times (April, June, July) and then to continue hiking 25bp at each subsequent meeting until it reaches 3.25% in March 2023. We see upside risks to our BoC call," BofA adds.

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