The Bank of Canada’s next interest rate decision will be on May 30th.
Pundits are saying the bank will stand pat, citing various economic statistics, trade uncertainty with NAFTA, lunar cycles, etc.
There is one other statistic that matters much more than others, and it is the following chart (10-year government bond yield):
As long as the spread between short-term rates and the 10-year yield remains greater than a percentage point, this gives them clearance to raise rates, especially when lock-step with the Federal Reserve.
My prediction, if it wasn’t obvious by the tone of the previous writing is, that barring some major change or news over the next week, the Bank of Canada will raise the short-term target rate to 1.5% (up 0.25%) on May 30th of this year.
Right now the 3-month Bankers’ Acceptance is at 1.69% which translates into 98.31 on the futures contract. Currently the June 2018 BAX Futures are trading at 1.81% (98.19), which also factors in some interest rate probability concerning the July 11, 2018 decision.
(Update, May 29, 2018: Given that 2, 5 and 10 year rates have dropped significantly in the past week, I’m withdrawing my prediction. Next cycle will depend on the rate spread between short-term and 10-year yields.)
Ballsy call….don’t think its going to happen.
I predict at least one more interest rate hike after May as well.
Given the crash in the 2, 5 and 10 year rates over the past week, I’m going to officially remove my prediction of a rate hike tomorrow!
Translation of the Bank of Canada’s May 30th release:
“We’re keeping things steady today, but probably will raise next time, so get ready.”