Bank of Canada Delivers First Hike in Three Years
(Morningstar) --“That [the hike] is, admittedly, at odds with our pre-decision call. As we saw it, underlying inflation is too soft, the labor market too weak and the trade backdrop too fragile to justify tightening at this point. The Bank seemingly agrees with that rationale in part, despite today’s rate rise, with Governor Macklem pushing back on the notion that this represents the clear beginning of a tightening cycle. Even so, we see today’s move as premature. Inflation excluding gasoline was just 2.2% YoY in September, and the Bank’s preferred measure of underlying price growth fell to 1.85% YoY in September. Add a labor market that has shed roughly 110k jobs over two months, and US trade tensions that will weigh on growth, and, in our view, the more prudent choice would have been patience. In any case, it is hard to see today as the first of many moves. We think Macklem’s framing is telling here, noting that decisions will be taken one meeting at a time, and while further hikes could be needed, the Bank will ‘proceed carefully’." —Nick Rees, head of macro research, Monex Canada
Reporting by Vikram Barhat