Bank of Canada may hike rates in October
ottawa — The Bank of Canada is likely to leave interest rates unchanged at its September 6 meeting and wait until October to raise them, allowing time for more data to show whether still-tame inflation pressure is picking up, a Reuters poll released on Friday showed.
While 24 of 33 economists surveyed in the past few days said an October rate hike was most likely, six forecast rates would rise on Wednesday to 1.0 per cent, with several changing their view after a very strong second-quarter gross domestic product (GDP) report.
Another three said the next rate hike would be in January.
The BoC in July raised rates for the first time in seven years, surprising some who thought the central bank lacked inflationary evidence to do so. But the latest poll suggests the decision at this meeting would be more clear-cut.
Roughly two years after Canada’s economy was hit hard by a sharp drop in the price of crude, a rebound in the major oil producer has made it the fastest grower among the Group of Seven most industrialised nations.
Second-quarter GDP growth clocked its best rate in nearly six years at an annualised 4.5 per cent, topping all forecasts in a Reuters poll.
While that is welcome news, the BoC has a better opportunity to explain
4.5% annualised GDP growth recorded in Q2
its policy in October when it updates its economic forecasts and holds a press conference, said Benjamin Reitzes, senior economist at BMO Capital Markets.
BoC officials have also refrained from making any public speeches since the July rate hike, which was preceded by several hawkish comments. “With this bank you can’t rule anything out. But after the pains they went through to signal July... and then you get nothing, it just makes it difficult to believe they want to go again,” said Reitzes.
While financial market pricing suggests a nearly 50 per cent probability of a hike next week from around 20 per cent ahead of the GDP figures on Thursday, traders have almost completely priced in a hike by October.