Bank of Canada Rate Hike Odds Shift Towards Earlier Tightening

Market attention has turned to whether the Bank of Canada (BoC) will hike interest rates in October, following the Federal Reserve's (Fed) rate increase this week. According to Nathan Janzen at Royal Bank of Canada (RBC), markets are focused on the BoC's next move.

The upcoming speech by Governor Macklem may provide some additional guidance ahead of the BoC's interest rate decision on October 28. Policymakers' focus is on inflation passthrough from higher energy prices, rather than elevated oil prices themselves.

RBC's base case is for gradual hikes starting in early 2027, although risks are shifting towards earlier tightening.