Canada's July Inflation Figures Set to Test BoC Rate Hike Expectations
The Canadian economy will be under scrutiny on Monday when Statistics Canada releases its Consumer Price Index (CPI) figures for July. The market is expecting a slight increase in inflation, with a forecast of 2.9% year-over-year growth, up from June's 2.8%. On a monthly basis, prices are expected to rise by 0.7%.
The Bank of Canada (BoC) kept its interest rate steady at 2.25% in July, in line with analysts' expectations. However, Governor Tiff Macklem warned against successive rate hikes due to the current economic slack and reduced annual economic growth projection.
Market participants expect just over 18 basis points of tightening by year-end. The Canadian Dollar (CAD) has been in a steady downtrend since late July, tracking developments in the Middle East conflicts and their impact on the Greenback. If inflation reverses its recent decline, bets on further rate hikes should increase, providing fresh legs for the CAD.