BoC Preview: The risk of a hawkish surprise remains, and with it the risk of a CAD reaction – Commerzbank

The Bank of Canada (BoC) holds its regular monetary policy meeting today. Economists at Commerzbank analyze Loonie’s outlook ahead of the Interest Rate Decision.

Will the BoC surprise again?

Both the market and the economists surveyed seem to agree that there will be no further rate hike. The main reason for this is likely to be last week's surprisingly low inflation figures.

With a tight labour market and high wage growth, there is a risk that inflation could still surprise to the upside. 

The BoC surprised us already in the spring by interrupting its rate pause and has continued to sound quite hawkish recently. This does not necessarily mean that the market is wrong and that the BoC will raise rates again today. But the risk of a hawkish surprise remains, and with it the risk of a CAD reaction.

See – BoC Preview: Forecasts from nine major banks, keeping rates on hold and prospect of further hikes alive