Royal Bank of Canada (RBC) has made comments regarding the Bank of Canada's (BoC) upcoming policy decisions, stating that recent economic data supports a rate hike in July.
Key Points:
Concerns Over Inflation: RBC highlights that the main takeaway from the Bank of Canada’s June statement, progress report, and minutes is an increasing concern over whether enough has been done to bring inflation sustainably back to the 2% target.
Factors behind Concerns: The concerns of the Bank of Canada are primarily driven by excess demand, persistent core inflation, and a resurgence in the housing market.
Likelihood of a July Rate Hike: RBC asserts that the economic data released since the June statement supports a rate hike in July. They believe that the rate hike is both likely and necessary to ensure that inflation returns to the 2% target.
Market Pricing Too Low: RBC believes that the market is underestimating the likelihood of a July rate hike. The market pricing for a rate hike in July has dropped from 75% to 60% this week, which RBC sees as too low given the current economic data.
Summary:
RBC emphasizes that recent economic data is consistent with a rate hike by the Bank of Canada in July. The bank highlights that the main concerns of the Bank of Canada revolve around inflation and whether enough has been done to bring it back to the 2% target. The factors driving these concerns include excess demand, core inflation, and the housing market. RBC believes that a rate hike in July is both likely and necessary, and argues that the market is currently underpricing the possibility of a rate hike.
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