Canadian Dollar: BoC rate hike bets seen as excessive - Standard Chartered
Standard Chartered economist Dan Pan expects the Bank of Canada (BoC) to keep its policy rate at 2.25% through end-2026 and 2027, despite market pricing for a much steeper tightening cycle.
The Canadian Dollar (CAD) has become a focal point in discussions surrounding the Bank of Canada's (BoC) next policy move. Market sentiment has shifted towards the likelihood of a rate hike at the upcoming meeting, causing USD/CAD to plummet to 1.4071, a significant drop from the 1.4300 peak reached on October 14. MUFG suggests that the BoC is likely to act, possibly with an additional rate hike in December.
Conversely, Standard Chartered maintains that the market's tightening expectations are overstated, anticipating the BoC to maintain its policy rate at 2.25% through the end of 2026 and 2027. RBC's survey findings highlight why this hawkish re-pricing is occurring: Canadian inflation expectations are rising rapidly, coinciding with the collapse of trade talks between Canada and the US. The next step for the CAD hinges on whether the BoC validates the rate-hike assumptions.
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