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Bank of Canada set for another supersized hike even as outlook darkens

26 October 2022 09:23 (UTC +04:00)

The Bank of Canada is widely expected to raise rates by another three-quarters of a percentage point to a fresh 14-year high, as stubbornly broad and persistent inflation outweighs worries that the rapid pace of tightening will trigger a recession, APA reports citing Reuters.

Five of Canada's six largest banks are forecasting 75-basis point hike to 4.0% after inflation data last week came in hotter than forecast, with one instead calling for a 50-bp move when the decision is released at 10 a.m. ET (1400 GMT).

Money markets see a roughly 70% chance of the larger increase and are betting the policy rate will peak at 4.5% next spring.

"Another chunky 75-bp rate hike is likely coming... and policymakers aren't ready to back off one iota yet," said Benjamin Reitzes, Canadian rates & macro strategist at BMO Capital Markets, in a note.

The Bank of Canada has hiked its policy rate by 300-basis points since March, making it one of the most aggressive major central banks and an eye-watering pace that has led to mounting worries Canada's economy will slip into a recession.

The central bank will release updated economic projections on Wednesday, which are expected to show a far dimmer outlook for both the Canadian and global economies, along with some hints of improvement on the inflation front.