BoC Preview: Expect another 50 bps hike but under-delivery remains a risk – Goldman Sachs

Economists at Goldman Sachs provide their expectations for this Wednesday’s Bank of Canada (BoC) interest rate hike.

Key quotes

"At this week's BoC meeting, our economists expect the Bank to deliver another 50bp hike, but under-delivery remains a risk on two fronts. First, it is possible that the BoC sees enough justification to hike by 25bps only, given the moderation in sequential underlying inflation. Second, we think that the BoC is likely to pause soon and the statement or press conference may already signal this next week.”

"CAD has had a solid performance this year on the BoC's aggressive hiking cycle but has underperformed the rest of G10 recently. This is mostly related to lower oil prices and lower yields (and a weaker USD on crosses). However, CAD on crosses remains our preferred expression in an environment of USD strength, which we expect to persist over the next 3 to 6 months."