|
All
25 analysts polled by Reuters expect Canada's central bank to
increase rates to 0.50% from the current record low 0.25% when
the decision is released at 10:00 a.m. ET (1500 GMT). It last
hiked rates in October 2018, then slashed three times in March
2020 as the COVID-19 pandemic took hold.
In January, the Bank surprised markets by holding rates even as
it said the economy had broadly recovered, taking the more
measured approach of formally casting off its commitment to keep
rates low and clearly signaling increases were coming.
"The Bank of Canada has been very explicit with what we should
expect. They've been saying that rates are headed higher," said
Royce Mendes, head of macro strategy at Desjardins Group. He
expects back-to-back hikes in March and April.
The Ukraine conflict is unlikely to derail that, Mendes said,
particularly with Canada's economic growth clocking in stronger
than expected and rising oil prices set to push already hot
inflation above forecast in the first quarter.
"This is coming at a time when the Bank of Canada is already
concerned about inflation expectations being on shaky ground,"
said Mendes.
Canada's inflation rate hit 5.1% in January, its highest level
since September 1991 and its 10th consecutive month above the
Bank of Canada's 1%-to-3% control range. Deputy Governor Tim
Lane said last month the Bank would be "forceful" in its moves.
That had some investors betting the central bank would start
with an initial 50-basis-point increase. But with Russia's
attack on Ukraine, markets now see 25 bps this month, with up to
six hikes in 2022 back to a pre-pandemic 1.75%. [BOCWATCH]
Where the Bank of Canada could surprise markets is with its
balance sheet. In January, the central bank said it would keep
its holdings of Government of Canada bonds stable "at least
until" it began to increase interest rates.
But some economists think it has already signaled an earlier
start.
Stephen Brown of Capital Economics pointed to Deputy Governor
Lane saying last month that quantitative tightening would begin
"as soon as we're starting to raise rates" and that the bank
would have more to say at its March decision.
"Maybe it was just a slip of a tongue," said Brown. "It would
just surprise me that he said that, if the bank hadn't exactly
already discussed something along those lines."
(Reporting by Julie Gordon in Ottawa; editing by Jonathan Oatis)
[© 2022 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
|
|
