Traders pare back Bank of Canada rate hike bets for this year
The Bank of Canada has held its overnight rate at 2.25% for seven straight meetings, with the next decision due October 28.
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Swap markets have scaled back wagers that the Bank of Canada will raise interest rates before the end of the year. Pricing from rateprobability.com showed a 41% probability of a hike at the central bank's October 28 meeting as of Thursday, down from levels seen earlier in the week, with an implied move of just 10.2 basis points.
The Bank of Canada has kept its overnight rate at 2.25% through seven consecutive announcements. Its next decision comes October 28 at 9:45 a.m. Eastern.
The shift marks a turn from the tone Governor Tiff Macklem struck in September, when he said after the central bank's rate hold that inflation risks were increasing and warned that moving too slowly on hikes could force a faster, larger response later. Canadian headline inflation had accelerated to 3% year over year in August. Not every forecaster agrees the Bank of Canada is done tightening: UBS Global Research economist Abigail Watt said the bank's baseline still includes a quarter-point hike in October and another in January, a call UBS pulled forward after recent Bank of Canada statements on inflation, according to Yahoo Finance Canada.
Traders paring back end-of-year hike bets instead point to growth concerns from US tariffs taking precedence over inflation risks tied to gasoline prices and the Iran conflict. If the Bank of Canada is now seen as more likely to hold or ease than to tighten, long-dated Treasurys could draw support as the broader North American rate path shifts lower alongside Canadian yields.