TD Securities expects the Bank of Canada to hold its 2.25% rate on Oct. 28, then raise it twice, FXStreet reported, taking the rate to the midpoint of the Bank’s neutral-rate estimate.
FXStreet said Andrew Kelvin and Robert Both lead the TD Securities macro team behind the forecast. The outlet said the team projects two 25-basis-point increases, the first in December and the second in January.
A 2.75% target would be 50 basis points above the current overnight rate and midway through the 2.25% to 3.25% neutral range estimated by Bank of Canada staff in May. The Bank treats the range as an estimate, not a policy target. It last held its overnight rate at 2.25% on Sept. 2.
Statistics Canada reported annual consumer price inflation of 3.1% in September, compared with 3.0% in August. Gasoline prices rose 27.8% year over year after a 22.8% increase in August, while the index excluding gasoline climbed 2.2% year over year. The Bank’s preferred core measures were CPI-common at 2.4%, CPI-median at 1.9% and CPI-trim at 1.8%. In its Sept. 2 statement, the Bank said gasoline was the main reason inflation was near 3%.
The Bank’s third-quarter survey recorded stronger business sentiment than in the previous quarter. Firms’ expectations for input costs and prices charged to customers had cooled but remained elevated; respondents often linked them to high global oil prices and trade tensions. Roughly half of firms planned to pass some or all higher costs associated with the Middle East conflict and tariffs on to customers. The Bank has also said U.S. tariffs and Canadian counter-tariffs could increase costs for some businesses and push consumer prices higher.
The Bank is scheduled to announce its decision and publish its quarterly Monetary Policy Report at 9:45 a.m. ET Wednesday, Oct. 28. Statistics Canada has scheduled its October inflation release for Nov. 16.
