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Markets Price A Bank of Canada Rate Hike by This December, with October Now in Play, Scotiabank Says

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Rate markets are pricing a full 25-basis-points Bank of Canada rate hike by December, with odds of an October move at around one-in-three, according to Scotiabank Economics in a Wednesday note, citing the Overnight Indexed Swap (OIS).

Higher oil and broader commodity prices, including the BoC's commodity price index that excludes energy, are adding to pressure on Canada's central bank to lift rates as soon as its Oct. 28 meeting, said Scotiabank.

BoC Governor Tiff Macklem has stepped up warnings on inflation risks ahead of a full round of forecast revisions, signaling a higher inflation outlook.

Against that backdrop, it would be a surprising outcome for the BoC to lift its inflation forecast without following through with a rate hike, added Scotiabank.

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