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MNI BOC Preview: Trying To Meet Market Hawkishness

EXECUTIVE SUMMARY

  • The BoC is widely expected to hike its overnight rate by 50bp and end the reinvestment phase.
  • The key inter-meeting nudge came from Deputy Governor Kozicki saying she expects the pace and magnitude of hikes and the start of QT to be active parts of our deliberations at our next decision in April, with the Bank prepared to act forcefully.
  • With the market pricing in close to 50bp of hikes for the meeting, 100bps over three months and 240bps over twelve months, the Bank is perhaps more likely to underwhelm than overdeliver (with form from its hawkish hold in Jan).
  • To keep up with hawkish expectations, existing guidance that “interest rates will need to rise further” could be modified by adding forcefully or as BofA outline "potentially briskly" or "potentially with some urgency". Unchanged guidance would be viewed dovishly, barring more hawkish implications found in the new economic projections and any changes to neutral rate estimates in the Monetary Policy Report.

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BOCPreviewApr2022.pdf

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