BOC: Will the December meeting decide on an additional interest rate hike
2023-11-21
■ Although the Bank of Canada (BOC) decided to maintain its policy interest rate at 5.00% at its October meeting, it still retains the possibility of additional rate hikes.
■ The increase in the consumer price index in October is likely to exceed the central bank's target, while crude oil prices and OPEC Plus response measures are also closely monitored.
According to the minutes of the board meeting released by the BOC on November 8th (held on October 25th), in order to gather more evidence of slowing economic growth and inflation, the six members unanimously agreed to maintain the policy interest rate at 5.00%. However, some participants believed that the possibility of further interest rate hikes was higher. This is the first time there has been a disagreement among members. Since March 2022, the policy interest rate has been raised by 0.25% to 5.00%, reaching its highest level in 22 years. In the future, based on obtaining more information, we will consider whether further interest rate hikes are needed. BOC Senior Vice President Rogers stated in a speech to financial practitioners on November 9th that the era of ultra-low interest rates is likely to have come to an end, and businesses and households should be prepared for future rising borrowing costs.
On November 21st, Statistics Canada will release the Consumer Price Index (CPI) for October. The market expects the year-on-year increase rate of CPI to slow to 3.2%, which is the lowest level in two years and three months since June. The growth of the median CPI (up 3.8%) and pruned average (up 3.7%) that BOC is concerned about is also expected to continue to slow down. But as long as they continue to exceed the inflation target (1-3%), BOC will likely maintain a tightening stance. Although the global expectation of stagnant interest rate hikes is expanding, considering the October meeting minutes, the market generally believes that the probability of BOC deciding to raise interest rates by an additional 0.25% at the December 6th meeting is over 90%. The crude oil futures price (WTI) has rapidly declined from its high of $95 per barrel in late September, while the Canadian dollar accelerated its decline in early November, sparking concerns about inflation. According to reports, the Organization of Petroleum Exporting Countries (OPEC) and its allies will hold a ministerial meeting on the 26th to discuss whether to further reduce crude oil production, which is also a factor that needs close attention.
■ The increase in the consumer price index in October is likely to exceed the central bank's target, while crude oil prices and OPEC Plus response measures are also closely monitored.
According to the minutes of the board meeting released by the BOC on November 8th (held on October 25th), in order to gather more evidence of slowing economic growth and inflation, the six members unanimously agreed to maintain the policy interest rate at 5.00%. However, some participants believed that the possibility of further interest rate hikes was higher. This is the first time there has been a disagreement among members. Since March 2022, the policy interest rate has been raised by 0.25% to 5.00%, reaching its highest level in 22 years. In the future, based on obtaining more information, we will consider whether further interest rate hikes are needed. BOC Senior Vice President Rogers stated in a speech to financial practitioners on November 9th that the era of ultra-low interest rates is likely to have come to an end, and businesses and households should be prepared for future rising borrowing costs.
On November 21st, Statistics Canada will release the Consumer Price Index (CPI) for October. The market expects the year-on-year increase rate of CPI to slow to 3.2%, which is the lowest level in two years and three months since June. The growth of the median CPI (up 3.8%) and pruned average (up 3.7%) that BOC is concerned about is also expected to continue to slow down. But as long as they continue to exceed the inflation target (1-3%), BOC will likely maintain a tightening stance. Although the global expectation of stagnant interest rate hikes is expanding, considering the October meeting minutes, the market generally believes that the probability of BOC deciding to raise interest rates by an additional 0.25% at the December 6th meeting is over 90%. The crude oil futures price (WTI) has rapidly declined from its high of $95 per barrel in late September, while the Canadian dollar accelerated its decline in early November, sparking concerns about inflation. According to reports, the Organization of Petroleum Exporting Countries (OPEC) and its allies will hold a ministerial meeting on the 26th to discuss whether to further reduce crude oil production, which is also a factor that needs close attention.