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Oct 27 - 12:55 PM

CAD: Much More Hawkish Than Expected; Overly Pessimistic About Supply Shocks - CIBC

By eFXdata  —  Oct 27 - 10:42 AM

CIBC Research discusses its reaction to today's BoC policy decision. 

"Canada’s central bank isn’t going to raise rates until the output gap is closed, but has newfound pessimism about the economy’s ability to produce goods and services in the wake of global supply disruptions. As a result, despite significantly lowering its economic growth forecast for this year, due to an offsetting reduction in potential growth (cut by 0.2% per year over 2021-23), it thinks the path for the output gap is going to be narrower than its July projection, and sees it closing in the “middle quarters of 2022” as opposed to “the second half of the year”," CIBC notes. 

"Overall, much more hawkish than we expected (although not more hawkish that what the market has priced in), and in our view, overly pessimistic about the how much supply shocks will constraint potential GDP ahead, and a bit optimistic in its growth forecasts, both of which could delay the timing of the first hike versus what is signaled here," CIBC adds. 

Source:
CIBC Research/Market Commentary

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