BOC to hike rates for the first time in October, not this week – Goldman Sachs

Ahead of the Bank of Canada’s (BOC) July monetary policy decision due this Wednesday, Michael Cahill, strategist at Goldman Sachs, said in its latest research note, the Canadian central bank will refrain from raising interest rates this week.

Key Quotes:

Market pricing at this point “looks like an oversteer”.

“While certainly a close call, we expect the BOC to hike rates for the first time in October, not next week.”

“Our view is that the decidedly hawkish BOC communications were a direct response to the lack of market reaction to the incremental hawkish changes at recent meetings.”

“When markets did not pick up on subtle hints, the BOC decided to be blunt. But that does not necessarily mean that a hike is days away.”

“The weakness in inflation data should give the BOC pause.”

“The recent inflation miss is a mark in that direction.

“The BOC — and governor Poloz in particular — have a reputation for being strict inflation targeters, and that should still matter now.”