'January still in play' for a hike: Bay Street reacts to BoC decision

"Assuming we get through [the uncertainty stemming from the Omicron variant] without any major negative results from the scientific studies, January could still very much be in play [for a rate hike]."

The Bank of Canada opted to stay the course in a statement-only interest rate decision Wednesday, leaving its benchmark rate at 0.25 per cent, while reaffirming that timing for its first post-pandemic rate hike will still likely fall somewhere in the “middle quarters” of 2022.

While the decision to keep borrowing costs historically low came as no surprise to Bay Street economists, the Bank itself was given something of a surprise with the emergence of the Omicron variant, which was first detected not long before its final meeting of 2021. 

In its statement, the central bank said the Canadian economy has enough momentum to power through the still-unknown threat of Omicron, as well as persistent supply chain bottlenecks. 

Here’s how Bay Street is reacting to Governor Tiff Macklem’s statement:

Josh Nye, senior economist at RBC

The BoC was held back by Omicron uncertainty but today's statement suggests that as long as that risk doesn't intensify in the next seven weeks, the BoC will sound more hawkish in January. Markets are now pricing roughly 50/50 odds of a rate hike at that meeting, though we think it’s more likely the BoC will signal upcoming rate hikes rather than actually raising rates in January.