Will the Bank of Canada keep it 100?

The most likely outcome from the Bank of Canada next week is a 75 basis points hike, but the central bank could deliver a second-straight full-point move, says National Bank Financial Inc. (NBF).

In a new report, NBF said there remains a “wide range of potential outcomes” for the coming rate decision on Sept. 7.

After the surprise 100 basis points move in July, NBF said, “We’re certainly more cognizant of the risk of a second-straight 100 basis point interest rate hike, and we think it’s a greater risk than is broadly appreciated.”

The bank put the probability of a 75 basis points hike by the central bank at 70%, with a 20% chance that it delivers another 100, and just 10% that it goes only 50 basis points.

“To us, 75 bps would be most consistent with what we’ve been told and the economic data we’ve taken receipt of. But it would be an understatement to say that the BoC (and other central banks) are deeply concerned with inflation,” the report said.

Alongside the uncertain rate decision, NBF said the bank’s accompanying statement will be closely watched.

Here too, there’s a good deal of uncertainty, but NBF said that after hiking rates above 3%, “we do expect the bank to strike a more data-dependent tone, putting the days of 75–100 bps hikes behind us.”

“We’ll also be hoping for some more medium-term guidance,” it said, adding that in the wake of “increasingly hawkish central bank rhetoric globally,” the prospect of further rate hikes in the fourth quarter has risen too.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.