BoC’s impact on CAD may prove rather short-lived barring a very dovish outcome – ING

The Bank of Canada is set to raise rates one last time on Wednesday with a 25 bps hike, taking the overnight rate to 4.5%. The initial CAD reaction may be rather contained, in the view of economists at ING. 

BoC not a key driver now

“25 bps of tightening is fully priced in for the March meeting, meaning that the BoC is widely expected to hike at the next occasion should it decide to hold this week. This means that the market reaction should not be very different if the BoC either: a) hikes by 25 bps and signals that rates may have peaked; b) holds rates but signals another hike may be on the cards.”

“Ultimately, barring a very dovish outcome (no hike and claiming that rates have peaked) or a very hawkish one (hike and signal more hikes), the impact on CAD may prove rather short-lived.”

See – BoC Preview: Forecasts from eight major banks, edging towards a final rate hike