The Canadian market briefly flirted with another Bank of Canada rate hike next week but last week both Canadian retail sales and CPI were below expectations. That has economists more comfortable that higher interest rates are biting the over-leveraged Canadian economy and frothy housing market.
The poll from Reuters of 32 economists is unanimous in seeing no change at the March 8 meeting and that aligns with market pricing at 98%. However markets see another 25 bps coming around mid-year while economists diverge.
- 17 see no change from 4.50% this year
- 13 see cuts
- 2 see hikes
All but one economist said the BOC was likely to adopt a hawkish tone at next week's meeting.
Some uncertainty surrounds how a falling currency due to Fed hikes could force the BOC to do more. USD/CAD was up 28 pips to 1.3622 but I don't think there would be a material issue until above 1.40, or even at 1.45.
