BoC: 25bps rate hike was more of a surprise – Rabobank

Analysts at Rabobank suggest that the timing of yesterday’s 25bps rate hike was more of a surprise than the move itself.

Key Quotes

“October had been favoured by economists for the policy announcement given that this would coincide with the publication of a new set of BoC forecasts. In the event, however, the recent spate of strong economic data proved to be sufficient to tip the scale in favour of an immediate move. Together with the 25bps hike announced in July, the BoC has now taken back the 50bps of easing provided in 2015 to cushion the blow of the oil price plunge.  This factor suggests that a pause is now possible particularly since inflation is still benign and high levels of household debt imply enhanced sensitivity to policy moves. However, as referred to in yesterday’s policy statement “future monetary policy decisions are not predetermined and will be guided by incoming economic data and financial market developments as they inform the outlook for inflation.”