{"id":16303,"date":"2022-12-08T08:40:18","date_gmt":"2022-12-08T08:40:18","guid":{"rendered":"https:\/\/www.xtreamforex.com\/?p=16303"},"modified":"2022-12-08T08:40:18","modified_gmt":"2022-12-08T08:40:18","slug":"bank-of-canadas-hikes-interest-rate-50-basis-points","status":"publish","type":"post","link":"https:\/\/www.xtrememarkets.com\/MU\/bank-of-canadas-hikes-interest-rate-50-basis-points\/","title":{"rendered":"Bank Of Canada\u2019s hikes interest rate 50 basis points"},"content":{"rendered":"

Bank Of Canada\u2019s hikes interest rate 50 basis points<\/h1>\n

 <\/p>\n

BoC hikes by 50 bps to 4.25%, bringing cumulative tightening to 400 bps this year.
\nSlightly hawkish surprise, consensus was split between 25 and 50 bps.
\nSoft tightening bias opens the door to a January pause.<\/p>\n

The BoC lifted its overnight rate by 50 bps to 4.25%, a stronger increase than the 25 bps which was expected. Consensus was almost evenly split between a 25 and 50 bp hike though market<\/strong> <\/a>pricing was leaning toward the former, so yields have increased and the Canadian dollar is a touch stronger in the wake of the decision. The policy statement wasn\u2019t as hawkish as the decision itself, in fact the BoC\u2019s updated forward guidance features a softer tightening bias than we expected. Rather than suggesting the \u201dthe policy interest rate will need to rise further, today\u2019s guidance is that \u201c Governing Council will be considering whether the policy interest rate needs to rise further\u201d. That clearly opens the door to a pause as soon as the next meeting in January, and in our view frames that decision as between 0 and 25 bps.<\/p>\n

There\u2019s plenty of data in the next seven weeks that will influence that January decision \u2013 Two CPI report, another month\u2019s GDP and jobs data, and the bank\u2019s quarterly BOS and CSCE surveys. Today\u2019s larger-than-expected hike was due in part to strong labor market data since the October meeting. Indeed, the statement noted \u201dCanada\u2019s labor market remains tight, with unemployment near historic lows.\u201d One jobs report isn\u2019t likely to change that story, but a soft December LFS would help build the case for a pause. And since the labor market is generally a lagging indicator, another muted increase in monthly GDP could also help push the BoC to the sidelines. The bank reiterated its view that growth will essentially stall in the coming quarters.<\/p>\n

The BoC is also likely to be watching changes in financial conditions over the next seven weeks. 5-year BoC bond yields were down 75bps in the month leading to today\u2019s decision- an easing in financial conditions that may have caused some discomfort and motivated yesterday\u2019s 50 bp hike. A further decline in yields could prompt push-back from the BoC, either through another hike in January or emphasis that rates will have to remain high for an extended period. We expect a challenging consumer backdrop and ongoing pullback in housing will see Canada\u2019s economy slip into recession in the first half of 2023. But with inflation remaining elevated, the BoC<\/strong> <\/a>isn\u2019t likely to react as quickly to that slow down as it has recent cycles.<\/p>\n","protected":false},"excerpt":{"rendered":"

Bank Of Canada\u2019s hikes interest rate 50 basis points   BoC hikes by 50 bps to 4.25%, bringing cumulative tightening to 400 bps this year. Slightly hawkish surprise, consensus was split between 25 and 50 bps. Soft tightening bias opens the door to a January pause. The BoC lifted its overnight rate by 50 bps<\/p>\n... continue reading<\/a>.","protected":false},"author":3,"featured_media":16304,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[17],"tags":[94,265,182,19,24,157,162,164,22,201],"yoast_head":"\r\nBank Of Canada\u2019s hikes interest rate 50 basis points<\/title>\r\n<meta name=\"description\" content=\"The BoC lifted its overnight rate by 50 bps to 4.25%, a stronger increase than the 25 bps which was expected.\" \/>\r\n<link rel=\"canonical\" href=\"https:\/\/www.xtrememarkets.com\/MU\/bank-of-canadas-hikes-interest-rate-50-basis-points\/\" \/>\r\n<meta property=\"og:locale\" content=\"en_US\" \/>\r\n<meta property=\"og:type\" content=\"article\" \/>\r\n<meta property=\"og:title\" content=\"Bank Of Canada\u2019s hikes interest rate 50 basis points\" \/>\r\n<meta property=\"og:description\" content=\"The BoC lifted its overnight rate by 50 bps to 4.25%, a stronger 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