With inflation already at a 30 Yr high and stick climbing, the BoC looks poised to take stronger action to dampen inflation pressures. Including inflation, wage inflation had also moved higher last month to 5.6% vs 4.5%, one thing most central banks globally want to control.
Previous BoC Rate Statement June 1st
- Near-7% inflation will rise in the near future before moderating.
- Officials are ready to act more forcefully to reach the 2% CPI target.
- Q2 growth is likely to be healthy due to strong consumer expenditure and prospects of stronger exports.
- The risk of elevated inflation becoming entrenched has risen.
June 9th - BoC Governor Macklem's Comments
- BoC's Gov. Macklem whether consumers could absorb a rate hike of more than 50 basis points: We may need to take a larger step.
- Decisions on what we do with pace and size of rate hikes depends mainly on inflation.
- We don't want to choke off demand, we want to get rid of the excess demand.
Investment Bank Views
UBS
They expect a 75 bps hike. They cite the chance of a 100 bps hike as being relatively low, due to the fact Macklem said in April that anything bigger than a 50 would be very unusual.
Other Banks
All the major investment banks expect a 75 bps hike from the BoC, including the likes of Goldman, BofA, and JPMorgan.
Market Reaction:
Canadian dollar strengthened
