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BofA Sees BoC Liftoff Tomorrow, 9 Hikes Over Two Years

CANADA
  • BofA expect the BoC to hike 25bps tomorrow to 0.5% “and to say there is no more slack in the economy”.
  • They see slack as being fully absorbed as of 1Q22 (the BoC’s necessary condition) with an output gap very close to zero, the unemployment rate well below its historical average and high oil prices adding pressure.
  • They see 5 hikes in total for 2022, front-loaded, before a further 4 in 2023.
  • “Liftoff and possible discussion of QT later this year should provide a catalyst for extension in the rates selloff and resumption of USDCAD downside”.
  • If the BoC opts to wait on rates, “we would fade price action and sell rallies in the front-end and USDCAD assuming a hawkish tone teeing up a hike in March”.
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