The Bank of Canada needs to take out insurance tomorrow, and it's a safe bet it will.
The BoC is trying to contain at least four risks:
- Core CPI lingering in the 3% range
- Inflation expectations getting stuck in the 3% to 4% range
- Counter-productive housing momentum
- An employment resurgence.
The Big 6 banks' crack econ teams (all of them) now project a hike on Wednesday. The #OIS# market is slightly less convinced, however. It's only got the likelihood at 68%. But, next-meeting probabilities over 65% are typically worth betting on.
Another increase would give our overnight rate a 5-handle for the first time since 2001. That's double the BoC's average #neutral rate# estimate—i.e., we're in highly restrictive territory.
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