BoC: Another step away from data dependence – Nomura

Analysts at Nomura note that the Bank of Canada (BoC) hiked its policy rate today by 25bp as widely expected and the removal of “gradual” may suggest a faster pace of rate hikes than Nomura have seen recently.

Key Quotes

“Furthermore, the language on data dependence was softened, from “guided” to “take into account”. For the market, all else being equal, we think this sends a message of a faster pace of hikes and less data dependence.”

“Governor Poloz and Deputy Governor Wilkins attempted to scale back this message somewhat in the press conference, reiterating that the BoC is still data dependent and that there remains much flexibility in policy normalisation. But we think the change in language was of course intentional.”

“The BoC also added that rates need to be raised to their neutral level to meet the inflation target. This neutral stance is still estimated to be 2.5-3.5% – note the market already prices the BoC to reach ~2.8% this cycle, slightly below the mid-range. This addition to the statement should not be a huge surprise.”