In view of analysts at TDS, the Canadian economy is strong enough today to support additional rate hikes in the immediate future (the output gap closed in Q3), but the BoC seems intent on taking a bit of a pause now that the 2015 “insurance cuts” have been removed.
“We look for the BoC to hike twice in 2018, but the Governor's preoccupation with structural issues and political risk factors raises some uncertainty around the timing. If history is any guide, the next shift to a hawkish stance will occur suddenly, which will leave the front end susceptible to large shocks.”
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