BUZZ-Look for BoC to soften the blow of a hike

Jul 10 11:24am By Peter Wadkins

Traders have already discounted a BoC rate hike on Wednesday, with odds at 95.64 on Eikon’s BOCWATCH, so the bank’s task afterward will be to soothe market concerns about what comes next since financial conditions have tightened in the run-up to the meeting and the loonie is crimping terms of trade. Gov Poloz’ recent comments bolstered the view that the BoC will press ahead [nL8N1JV3HN] with a 25bp rate hike despite USD/CAD’s 4.75% fall and oil’s 16-17% drop since their May 24 meeting. Some pundits think it may be a mistake [nNRA446mxm]. Poloz’s rationale is to head off inflation 18 months to 2 years from now, which is a hard sell considering stubbornly low inflation rates in the developed world. One-Yr Canadian BA rates have jumped 40bp since Sr. Dep. Gov Wilkins tipped the market on June 12th that a rate hike was coming later this year. Soothing comments will be the order of the day on Wednesday.


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