BoC Seen Hiking 25bp But Close Call With 50bp

JPMorgan look for the BoC to hike 25bp on Wednesday, further slowing the pace of increases since a jumbo 100bp hike in July, 75bp in Sep and 50bp in Oct.

• There are however heighted risks of a 50bp hike as there could be concerns that wages are still rising too rapidly and GDP growth came in significantly stronger than what was forecast (albeit with mixed details).
• The three month run rates of underlying core goods and core services inflation are down sharply since June and the Bank’s preferred core measures have essentially stopped their steep upward climb and look to have stabilized, although at an elevated 5.0%.
• Pipeline pressures from supply chain disruptions are easing and overheated post pandemic demand for hospitality and travel services is unwinding and leading to softer price pressure, whilst elevated inventories suggest downside pressures on prices ahead.
• There should be a growing sense of optimism about the outlook of inflation dynamics at the Bank, but while there are signs of cooling in the labor market, the Bank has signaled that it is too hot and that more slack is needed.