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Odds of a hike sag
The Bank of Canada meets on Wednesday in a decision that doesn’t include fresh forecasts or a press conference.
It will be all about the statement and a speech from Wilkins a day later that will clear any misconceptions up. The market dabbled with the idea of a hike for weeks but has recently faded. At the moment, the OIS market is indicating only about an 8% chance of a hike. The only economists forecasting a move are from Scotiabank and they’re just being stubborn at this point.
The white line here shows the declining probabilities of a hike Wednesday:
The nail in the coffin was Poloz’s speech in Jackson Hole. He could have used the occasion to firm up expectations of a hike and he didn’t. That kind of silence speaks volumes. It’s also a reflection of the deterioration in NAFTA talks
The bigger question is what will happen in October. At the moment, the odds of a hike are at 76% as the BOC pushes the ‘gradual’ rhetoric and the market increasingly sees it as a hint of hikes at roughly alternate meetings. Recent high readings on GDP and inflation have also helped.