Economics

Traders Increasingly Doubt Bank of Canada’s Rate-Hike Timeline

Markets expect Macklem to move far sooner than he’s suggesting
Scotia warns of ‘dumpster fire’ if central bank capitulates

Tiff Macklem, shown in May 2020, conceded last week that ‘measures of inflation are probably going to take a little longer to come back down.’Photographer: David Kawai/Bloomberg

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By Erik Hertzberg

October 19, 2021 at 1:52 PM UTC

This article is for subscribers only.

Traders are betting that the Bank of Canada will be forced into raising interest rates earlier than expected, posing one of the stiffest tests yet for Governor Tiff Macklem.

Bets in the overnight swaps market are increasingly tilting toward a move early next year, well ahead of the U.S. Federal Reserve. Traders have now priced in three hikes in Canada by the end of 2022, which would bring the policy rate to 1% from the current 0.25%.