BoC Hold Priced, Market Uncertainty Reigns
The Bank of Canada is expected to maintain its interest rate at 2.25% on Wednesday, as per the consensus among economists surveyed by Reuters and market pricing.
All 35 economists polled forecast a hold, with most expecting the first hike in Q4 2027, while markets are pricing in roughly 1.76 quarter-point hikes by March 2027, giving it a 76.8% marginal probability of an increase.
This discrepancy between economist consensus and market pricing is largely due to differing views on what constitutes a 'hawkish' scenario, with some banks, such as National Bank and Scotiabank, expecting the BoC to hike rates in October and December, well ahead of the expected timeline.
The tone of the Bank's statement will be crucial in determining market expectations, with a more hawkish tone potentially validating markets' earlier tightening timeline and a dovish tone supporting economist consensus.