Bank of Canada meets July 12
A strong jobs report changed a high likelihood of a Bank of Canada rate hike next week into a virtual certainty. Canada added 45K jobs in the month compared to 10K expected and that boosted the implied probability of a hike in the OIS market to 93% from 83%. Other measures show an even higher probability.
The foreign exchange market is also signaling a hike as USD/CAD slips below 1.29 for the first time since September. It's been a one-way move from 1.38 two months ago.
Economists at CIBC changed their call to a hike after the jobs data but there remain many holdouts. A poll from Reuters still shows a slim majority calling for no change.
What's more difficult to forecast is what happens after a rate hike next week. Wilkins framed a potential hike as a reversal of the 'insurance' the BOC took out last year. That 'insurance' was two 25 bps rate cuts. Beyond that the BOC may wait for signs of inflation.
The poll from Reuters, however, shows a series of hikes continuing into 2018-2019.
