The Royal Bank of Canada (RBC) commented on the Bank of Canada’s (BoC) upcoming policy decisions, noting that recent economic data supports a July rate hike.
the main points:
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Concerns about inflationRBC highlights that the main takeaway from the Bank of Canada’s June statement, progress report and minutes is a growing concern about whether enough has been done to return inflation sustainably to the 2% target.
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Underlying factors for fears: The Bank of Canada’s concerns are primarily driven by excess demand, persistent core inflation, and a resurgence in the housing market.
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Possibility of a rate hike in JulyRBC confirms that economic data released since the June statement support a rate hike in July. They believe that a rate hike is both possible and necessary to ensure that inflation returns to the 2% target.
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The market price is very low: RBC believes that the market is underestimating the possibility of a rate hike in July. Market prices for the July interest rate hike have fallen from 75% to 60% this week, which RBC sees as very low given the current economic data.
summary:
RBC confirms that recent economic data is consistent with a rate hike by the Bank of Canada in July. The bank highlights that the BoC’s main concerns revolve around inflation and whether enough has been done to bring it back to the 2% target. Factors driving these concerns include increasing demand, core inflation and the housing market. RBC believes that a rate hike in July is both likely and necessary, and argues that the market is currently underestimating the likelihood of a rate hike.
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