BoC: Forecasts From Three Major Banks

The Bank of Canada (BoC) will announce its monetary policy decisions at 14:00 GMT. here are the expectations as forecast by the economists and researchers of Three major banks

TDS

“We expect the BoC to argue that the inflation surge is largely transitory, and to hold forward guidance for the overnight rate unchanged with rate hikes expected in 2022H2. We also look for the BoC to announce the end of its QE program in its current guise, with the reinvestment phase beginning in November.”

Citibank

“This week’s BoC meeting is probably not the time for a change in the policy stance as the spread between actual and potential growth (the output gap) is unlikely to close any earlier than the current guidance for H2-2022. This guidance remaining unchanged could be a disappointment to markets pricing over 30bp of rate hikes by the April 2022 meeting. Citi analysts however expect the BoC to further reduce the pace of asset purchases to CAD1 B per week.”

NBF

“We’re not looking for a significant change in tone, though we will likely get an acknowledgment of stronger-than-expected price hikes to date and potential upside risks ahead. A revised economic outlook will also be presented in the Bank’s new Monetary Policy Report. With growth stumbling recently, a markdown to the GDP outlook seems all but certain. The Bank’s inflation projections, on the other hand, will likely be tweaked upward. That said, given its assessment that there is slack still in the economy (including in labour markets), the Bank should project inflation falling back towards its target next year. As for policy changes, we’re looking for the central bank to taper its QE program once again, providing additional guidance on the so-called reinvestment phase that will follow. Finally, there is uncertainty on how the Bank will manage its policy rate forward guidance, but based on recent Tiff Macklem communications, we continue to expect the central bank to flag lift-off in the second half of 2022.”