Bank of Canada expected to leave policy rate unchanged – Rabobank

A 2.25% overnight policy rate remains the forecast for the Bank of Canada (BoC) at its 28 October meeting, according to Rabobank strategists Christian Lawrence and Molly Schwartz, although OIS markets imply an 85% probability of a hike. The strategists point to uneven labour-market figures, price pressures centred on shelter and energy, and survey findings indicating persistent risks to demand. Their Canadian interest-rate outlook has the BoC holding at 2.25% over the next 12 months.

BoC hike pricing contrasts with Rabobank’s hold forecast

"We expect the Bank of Canada to hold the overnight policy rate at 2.25% on October 28, despite the OIS pricing leaning in favor of a hike."

"Our case for a hold is not that a hike would necessarily worsen inflation readings, but that now is not the most effective time."

"We are forecasting a hold at 2.25% through year end, with the risk to our view skewed in favor of a hike at the upcoming meeting."

"Macklem’s speech at the IIF Forum in Bangkok a few weeks ago also supported the OIS repricing."

(An editor reviewed this article, which was produced with assistance from an artificial intelligence tool. Find out more.)