BoC: Striking while the iron is hot – Rabobank

Analysts at Rabobank now expect the BoC to 'strike while the iron is hot' and announce a 25bp hike at the January 17 meeting.

Key Quotes

“Previously we expected the Bank of Canada to announce its next 25bp hike in April.”

“This follows on from the 50bp of tightening announced during 2017 to unwind the Bank's two 25bp "insurance cuts" from 2015.”

“December's labour report was markedly upbeat, completing the trend seen throughout 2017 in terms of both job quantity and quality.”

“Governor Poloz recently reminded the market that "cautious" does not imply being "on hold"

“These factors, coupled with a robust business outlook survey (which was the report that helped trigger the first hike last year) have significantly raised the probability of a January hike.”

“Furthermore, the market is now around 85% priced for a January move and so the BoC should be able to raise rates with a relatively subdued response from markets.”