Bank of Canada: Rabobank expects policy rate to remain unchanged

Despite OIS markets pricing in an 85% chance of a rate hike, Rabobank strategists Christian Lawrence and Molly Schwartz expect the Bank of Canada (BoC) to leave its overnight policy rate unchanged at 2.25% on 28 October. Their assessment points to uneven labour-market readings, price pressures concentrated in shelter and energy, and surveys indicating persistent risks to demand. Their Canadian interest-rate forecast sees the BoC holding at 2.25% over the next 12 months.

Why Do BoC Rate Hike Odds Differ from Rabobank’s View?

"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."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)