Today’s Bank of Canada meeting today could be ‘one of the most exciting in a long time’: CIBC
Some analysts expect ‘one of the most exciting’ Bank of Canada meetings in a long time tomorrow as policy makers confront mixed data.
“The reason is not because a hike in administered rates is expected rather, it is a result of some conflicting domestic themes – each arguing for a conflicting policy response – that are creating legitimate confusion over the path of rates,” Ian Pollick, CIBC’s
Head of North American Rates Strategy, said in a note Tuesday.
Most economists expect the central bank to hold its key interest rate at 1.25 per cent, but the bank is navigating a clash of information forming in the backdrop of upcoming monetary decisions. How Governor Stephen Poloz reacts to this divide could set the tone for his future approach.
Economists say business outlooks are up and inflation is rising, but a slow growth rate is dampening expectations of a hike today.
“Corporate Canada is feeling upbeat and have felt relatively little fallout from trade uncertainty on the back of NAFTA developments,” CIBC said.
Inflation that hit 1.6 per cent in the boom year 2017, is creeping back up. The loonie is riding on seven weeks of growth, and was at 80 US cents Tuesday.
Scotiabank expects a rate hike in the third quarter, citing heightened uncertainty with NAFTA and “broader trade policy risks” as reasons for the bank to stay cautious for now.
A BofA Merrill Lynch Global Research report expects a hike this May and two more in October and December, after the Fed, “putting the overnight rate at 2% by year-end.”
However, a report from Standard Chartered bank cited positive business and labour sentiments and the lack of ripple effects from the housing market regulation to the rest of the economy, as a “strong case” for a hike today.
“We expect the BoC to raise the target policy rate by 25bps to 1.5%, though we recognize that, given the cautious tone struck by bank officials in the past months, risks are skewed to the downside,” they said, hedging their bets slightly in the report.