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BoC hold at 2.25% is priced in, focus shifts to timing of hikes
Economists expect the first Bank of Canada hike in Q4 2027, while OIS pricing as of Sept. 1 implies about 1.76 quarter point hikes by March 3, 2027, putting the debate on timing rather than the decision.
The Bank of Canada is expected to keep its policy rate at 2.25% at its Wednesday meeting, with all 35 economists surveyed by Reuters forecasting a hold and market pricing matching that call, according to Action Forex.
Although the decision itself appears fully priced, Action Forex says the real driver for USD/CAD is the tone of the BoC and, more importantly, the timing of potential future tightening, where economist expectations and market pricing diverge sharply.
Reuters consensus sees the first hike arriving only in Q4 2027, and fewer than half of the economists who provided forecasts expect even one increase by the end of Q2 2027.
Action Forex adds that OIS pricing as of Sept. 1 embeds roughly 1.76 quarter point hikes by March 3, 2027, with the March meeting carrying about a 76.8% marginal probability of an increase, meaning the market is looking several quarters ahead of the median economist view. It also notes that some banks, including National Bank and Scotiabank, expect an earlier move, with hikes toward 2.50% in October and 2.75% in December.