ING Research reviews the October BoC policy meeting.

"The Bank of Canada raised rates by 25bp to 2.50% yesterday, in line with market expectations. Stronger activity and growing concerns about cost pass-through suggest this is unlikely to be a one-and-done move, although policymakers stressed they will proceed carefully. We expect another 25bp hike in 1Q27, most likely in January, with the risk that persistently high energy prices bring that move forward to December. That said, we think markets are too hawkish in pricing around 90bp of tightening over the next 12 months. The BoC’s central estimate of neutral is around 2.75%, and while second-round inflation effects should emerge as firms pass higher costs to consumers, we expect them to remain contained, particularly when it comes to wage growth. Our base case therefore remains that rates peak at 2.75%," ING notes.

"For CAD, oil remains the key swing factor. High prices can keep December hike expectations alive and support the currency, but we remain bearish on oil and think a correction would trigger dovish BoC repricing. We therefore see limited room for CAD gains from the domestic story alone and retain our year-end USD/CAD target of 1.420," ING adds.