Bank of Canada to deliver a 75 bps hike on Wednesday

The Bank of Canada is expected to issue its latest monetary policy decision on Wednesday. A rate hike of 75 basis points is widely expected. Analysts believe that central bank will slow down the pace of its rate hikes after this September’s meeting, only taking the policy rate to 3.75% by the end of Q4.

The BoC has adopted one of the more aggressive policy-tightening across all G10 nations. There are some hints indicating that the effects of tighter monetary policy could be starting to cool inflation down.

Inflation levels in Canada decelerated to a 7.6% year-over-year pace in July, driven by falling commodity prices. However, the average of three core inflation measures ticked up to 5.3%, indicating that underlying price pressures still remain elevated for now.

After a jumbo 100 bps rate hike in July, the BoC is expected to deliver a 75-bps hike to 3.25% at its September meeting on Wednesday. The BoC will also slow down the pace of its hikes beyond September, only taking the policy rate to 3.75% by the end of Q4.

The major risks for the Canadian economy hover around guidance on future policy from the BoC, especially against a backdrop of slowing growth and the current high inflation.