RBC Capital Markets anticipates that the Bank of Canada (BoC) will maintain its key interest rate at 5.00% in its upcoming September policy meeting. Despite a hawkish tone in the July statement and Monetary Policy Report (MPR), Governor Macklem struck a more balanced note in the associated press conference. The upcoming Q2 GDP report represents a significant risk factor, while current market pricing only suggests a 25-30% chance of a rate hike.
July's Hawkish Tone: The BoC outlined reasons for a rate hike in its July statement and MPR, suggesting the possibility of further tightening.
Balanced Views from Governor Macklem: During the press conference that followed the July meeting, Governor Macklem discussed both the risks of over-tightening and under-tightening, suggesting a more balanced policy approach.
Upcoming Q2 GDP Report: This Friday's release of the Q2 GDP data is a significant factor that could influence the BoC's decision.
Market Pricing: Current market pricing indicates only a 25-30% chance of a rate hike at the September meeting.
For Traders and Investors:
Caution Ahead of GDP Data: Market participants should keep a close eye on this Friday's Q2 GDP report, as it could influence the BoC's decision.
Low Expectation of Hike: With the market pricing in a low probability for a rate hike, traders should be prepared for potential volatility should the BoC surprise the market.
RBC expects the BoC to hold the key interest rate steady at 5.00% during the September 6 policy meeting. The balanced rhetoric from Governor Macklem and the looming Q2 GDP report suggest that the central bank is keeping its options open. Traders and investors should pay close attention to upcoming economic indicators and be prepared for potential market movements.