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Analysts Looking For No Further Hikes From BoC [2/2]

CANADA
  • ING: The BoC left the policy rate at 5% but warned that with inflation pressures remaining elevated it could yet hike again. We don’t think they will need to as high borrowing exposure and lagged effects of policy tightening increasingly weigh on an economy that is already showing some cracks. The negative implications for CAD are, however, limited.
  • RBC: The BoC remains highly data-dependent and won't hesitate to push interest rates higher if necessary to return inflation to the 2% target rate. And there are two additional labour market reports and two additional inflation reports before the next scheduled decision in October. But we continue to expect that the recent soft-patch in economic data will continue, and look for the overnight rate to hold where it is through the end of this year.
  • TD: Our expectation is that this period of "weak economic growth" is set to continue over the rest of this year and into early 2024. Although the BoC has moved back to the sidelines, it doesn't mean it will let up on its hawkish rhetoric. It needs to make sure that financial conditions remain tight for the economy to continue to slow. Markets are still in the 'will they, won't they' camp, with pricing for another hike around 50%. Given that the slowdown looks to continue, we think the bar for another hike has been raised.
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