International Trading


In light of the latest Bank of Canada press release, Mr. Carney appears unlikely to pause its tightening campaign the way we had expected him to do. The Bank of Canada was sending a message when it purposely left out of its press release many of the concerns it had expressed in July. Whether we like it or not, the BoC has maintained a tightening bias.

Since the current uncertain situation has not altered the Bank's view on the Canadian inflation dynamics, we have to think that the policy rate will continue to be raised at a moderate pace at each of the next two interest-setting meetings. Unless more clouds gather on the horizon over the coming weeks, our forecast calling for a 1.5% overnight rate with a Canadian dollar at par against the USD by Q1 2011 will occur faster than what we had envisaged. Accordingly, we have updated our interest rate forecast to reflect the latest BoC’s interest rate hike and U.S bond market action.

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