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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Executive Summary:
- The OIS market is pricing in ~70% chance of a first 25bp hike on Wednesday. Bloomberg has consensus the other way with a steadily falling majority of 15:11 in favour of holding, but we caution that some responses could still be out of date with further tilt towards a balance come the decision.
- Since the BoC last met, the labour market continued to tighten (Jan 7) whilst more recently there was sign of greater inflationary pressures in the Bank’s key surveys for Q4 (Jan 17) and core inflation measures increased further in Dec with the average close to 3% Y/Y (Jan 20).
- MNI expects the BoC will hike this week barring a further slide in equities over the coming days. Governor Macklem has previously indicated that price stability is “job one” for the BoC and that “time is getting closer” to remove forward guidance of lift-off in mid-2022.
- Refreshed economic projections for CPI and potential output will help shape analyst rate path expectations, which are currently quite diverse, although OIS pricing more than five hikes in 2022 could limit potential for a materially hawkish surprise.
- Whilst likely too early to get anything concrete on balance sheet normalisation, analysts are increasingly looking for hints ahead of runoff potentially starting in 2H2022 (with risk of earlier).
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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