Bank of Canada's smaller-than-expected hike increases chance of falling behind the curve: Davis

The Bank of Canada's smaller-than-expected rate hike increases the chance of running behind the curve, and the central bank might have to make up for it later, according to Earl Davis, head of fixed income at BMO Global Asset Management.

On Wednesday, the central bank hiked interest rates for the sixth-straight time. The Bank of Canada increased its benchmark overnight lending rate by 50 basis points, bringing it to 3.75 per cent.

Davis said the majority of economists were expecting a hike of 75 basis points or more.

“It surprised us as well, we think as a team that increases the likelihood of being behind the curve,” Davis said in an interview with BNN Bloomberg on Thursday.