Economists at Standard Chartered expect a 25bps Bank of Canada (BoC) hike in January, and see the end-2022 policy rate at 1.5%. Subsequently, the Canadian dollar is set to strenghten, driving the USD/CAD pair lower to the 1.15 level by end-2022.

BoC to deliver another 25bps hike in March

“We now expect BoC to raise its policy rate by 25bps to 0.5% amid soaring inflation readings and robust economic recovery. We expect the BoC to hike again in March and bring the end-2022 policy rate to 1.5% (1.25% prior).”

“The hike is about 65% priced in, so markets could be modestly surprised. We doubt that the BoC will endorse the six hikes now priced in, but the CAD could strengthen a bit if the BoC signals a follow-up hike in March.”

“A clear signal that balance sheet shrinkage is likely to start in H1 would add support for the CAD.”

“We target 1.15 by end-2022.”

This article was originally published by the original article here.


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