Just days before Canada's October 19 CPI release, the Bank of Canada rate outlook is looking interesting. As of October 15, CORRA futures-implied probabilities show a 70% chance of holding at 2.25%, a 30% chance of hiking to 2.50%, and a 0% chance of a cut ahead of the October 28 decision.
The market seems comfortable betting on a hold for now, but that 30% hike probability leaves room for a surprise. With CPI just around the corner, one inflation reading may change the conversation heading into October 28 and potentially influence expectations for December as well. A hotter-than-expected reading may keep tightening risks alive, while softer inflation may strengthen the case for holding rates steady.
The market has made its prediction. Now it's inflation's turn to weigh in.
Can the next CPI report influence October's rate decision or reshape market expectations for December?
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