BoC: expects inflation to return to close to 2% target by mid-2018 - UOB

Analysts at UOB Group explained that The Bank of Canada (BOC) as widely expected hike its policy rate by 25bps to 0.75% on 12 Jul, the first hike since 2010 and the only G7 central bank to do so after the US Fed Reserve. 

Key Quotes:

"The BOC also revised its GDP outlook: - Raises 2017 GDP forecast from +2.6% to +2.8%. - Raises 2018 GDP forecast from +1.9% to +2.0%. - Expects 3% growth in Q2 followed by 2% growth in Q3."

"BOC also expects inflation to return to close to 2% target by mid-2018 while growth is becoming more sustainable and significant amount of slack has been absorbed."

"BOC Governor Steven Poloz and his deputy, Carolyn Wilkins did put up the caveat that future policy adjustments to be guided by incoming data, keeping in mind continued uncertainty and financial system vulnerabilities."

"There is no BOC monetary meeting in August and the next policy decision is on 6 September."

"Market rate hike expectations for BOC in the September meeting is at just 35.7% (as of 12 Jul 2017), based on trading in futures and options data compiled by Bloomberg (WIRP)."