According to Scotiabank's Shaun Osborne, the latest Canada jobs data indicate a "fair degree of resilience" in the economy, which could signal a more aggressive rate hike from the Bank of Canada later this year.
"the rate hike cycle is nearing a peak, and what the bank says about the policy outlook may be more important than what it does; a 25bps hike with mildly hawkish guidance—a little more tightening to come—may be more supportive than a 50bps hike with a neutral policy outlook, signaling the bank was moving to the sidelines," Osborne wrote in a note on Monday.
Scotia Bank currently Forecast 4.25% (50 bps Hike)
Currently Forecasting 4.25% (50 bps Hike)
"It would send the wrong message, and it would be a strange time, to further slow the pace of hikes," said economists at Citigroup, Veronica Clark, and Gisela Hoxha, in a report to investors. They anticipate a 50-basis-point increase.
Royal Bank of Canada:
Currently Forecasting 4.00% (25bps)
"It makes sense now to slow down on rate hikes and be more data dependent," said Josh Nye, assistant chief economist at the Royal Bank of Canada. He anticipates a 25-basis-point increase on Wednesday and sees no obvious signs of a pause.
Markets are less convinced, with swaps traders favoring a 25-basis-point adjustment.
Overnight swaps Traders believe the Bank of Canada will raise its benchmark rate to at least 4.25% before stopping, which is lower than expectations for the Federal Reserve, with US borrowing costs expected to rise to 5% or higher.
Statements Made by the Bank of Canada at the last Rate decision:
BoC: Inflation in Canada remains excessive, and underlying inflationary pressures remain high; the economy is operating with enormous excess demand.
BoC: Annualized 2022 Q2 GDP seen at 3.3% (vs 4.0% in July), Q3 1.5% (vs 2.0%), Q4 0.5%.
BoC: High energy costs appear to have had a much larger impact on inflation than usual; it will take time for these unusually large effects to fade completely.
BoC: Future hikes will be influenced by evaluations of how tighter monetary policy is functioning to dampen demand, how supply issues are being resolved, and how inflation and inflation expectations are reacting.
BoC's Gov. Macklem: BoC sees a significant slowing of the Canadian economy.
Market Reaction to the last Rate decision: Actual 3.75% (50 bps hike) , Forecast 4.00% , Prior 3.25%