#USDCAD @ 1.31705 : Loonie may not strengthen despite the rate hikes – HSBC
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The Bank of Canada (BoC) raised its policy rate by 75 bps to 3.25%, slightly above the estimated neutral rate range. Nevertheless, economists at HSBC do not expect the loonie to benefit from rate hikes.
“The BoC met consensus expectations in lifting its policy rate by 75 bps to 3.25% on 7 September, slightly above the top end of the 2-3% range for the estimated neutral rate. However, the BoC’s statement indicates that the Governing Council does not see its job as done and that further interest rate hikes are on the way.”
“We expect the BoC to raise its policy rate by 50 bps to 3.75% at its next policy meeting on 26 October, and by 25 bps to 4.0% in January 2023. Despite the rate hikes, we may not see the CAD strengthening, as the currency has been more responsive to risk sentiment, and to some extent, oil prices.”
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