VIEW: Scotiabank suggest that "given the.....>

CANADA: VIEW: Scotiabank suggest that "given the improved outlook, we now expect

that the BoC will raise rates more rapidly, with the next increase in Sep,

followed by another in Dec. We have not changed our view on the total amount of

tightening required by end-'19, which remains 100bp above current levels. The

shift we now foresee simply brings forward some of that tightening. Growth will

remain well above the BoC's estimate of potential this year, and we now forecast

that core inflation will peak at 2.3% rather than the 2.2% we predicted in our

last update. These factors add to what is clearly a more hawkish stance by Gov

Poloz, in which he now argues, among other factors, that the BoC will only

respond to negative developments if they occur. Mkts appear to be dramatically

underpricing the odds of additional MonPol tightening in Canada. Roughly 5bp of

tightening by the BoC are priced in for Sep. About 40 basis points are priced in

by the end of '19. Developments in trade policy as well as the evolution of key

economic indicators will naturally influence our thinking as we get closer to

Sep. If the situation unfolds as we expect, we think Poloz will be compelled to

raise rates in Sep even if market pricing hasn't adjusted by then."