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VIEW: ING See Terminal 4.75%, High End Of Expectations

CANADA
  • ING see a 75bp hike as the most likely outcome on Wed, having previously favoured 50bps before the Sept inflation report and BOS
  • Inflation expectations hit a new record high while employment growth has resumed and business sales expectations have ticked higher. Combined with the BoC’s current stance, it’s difficult to justify slowing the pace of hikes, particularly with the Fed expected to continue with 75bp hikes at forthcoming meetings.
  • They look for a step down to 50bp in Dec with perhaps a final 25bp hike in early 2023, leaving a terminal 4.75%.
  • Beyond that, the Bank is likely to pause as core CPI starts recording 0.2-0.3% M/M, with a strong likelihood of cuts in 2H23 as recessionary pressures mount.
  • However, the current adverse risk environment continues to point to a higher USDCAD with risks skewed to 1.40 being tested, although they still see a return to 1.30 in 2023 with CAD a market favourite to play pro-cyclical bets.
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