Cooler U.S. inflation lowers odds of 75-basis-point rate hike in Canada
BNN Bloomberg
Slowing U.S. inflation is prompting traders to pare bets for a 75-basis-point increase in interest rates from the Bank of Canada next month.
Overnight swap markets suggest about a 45 per cent chance that officials led by Governor Tiff Macklem will increase borrowing costs by three quarters of a percentage point at their Sept. 7 decision. A move of that magnitude would bring the policy rate to 3.25 per cent, the highest since April 2008.
Bets were trimmed from around 60 per cent earlier Wednesday, before U.S. consumer price data showed yearly inflation slowing to 8.5 per cent, a lower reading than economists anticipated.
The downside surprise prompted traders to dial back wagers on not only the Federal Reserve’s hiking path, but also the Bank of Canada’s, on the possibility policy makers may not need to tighten financial conditions as quickly or as much as previously expected to rein in persistent price pressures.
