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CIBC: GDP Tipped Scales Away From Sept Hike, BoC Should Be Done For The Cycle

CANADA
  • CIBC note that they had expressed doubts about the need for July’s rate hike when it was announced. Those doubts were borne out in Friday's lacklustre GDP data, particularly since the monthly GDP trend isn’t encouraging for Q3.
  • The BoC’s impatience in July had us believing that it would carry on with yet another intemperate hike in September. But data in the past week has tipped the scales enough that we expect the BoC to do the right thing, and opt to pause next week.
  • As in the US, don’t expect Gov. Macklem to formally declare that rates have definitely peaked. He’ll need to see more disinflationary momentum for that, and it could be some months before we’ll have enough labour market slack for the Bank to be comfortable in stating that rates are high enough to do the job.
  • But if they skip a hike in September, we expect that the balance of risk calculation will ultimately clarify that rates have in fact peaked for this cycle.
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