BoC Signals More Hikes as Inflation Fight Persists

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BoC Signals More Hikes as Inflation Fight Persists

S&P/TSX36,170.50-0.76%

USD/CAD1.42+0.76%

EUR/CAD1.58-0.06%

WTI Crude86.69+0.76%

Market Snapshot

Asset	Level	Change
S&P/TSX	36,170.50	-0.76%
USD/CAD	1.42	+0.76%
EUR/CAD	1.58	-0.06%
WTI Crude	86.69	+0.76%
Natural Gas	3.31	+0.42%
Gold	4,062.60	+0.80%
Brent Crude	92.83	+1.46%
Bitcoin	73,973.15	+0.34%
Canada 2Y Govt Yield	3.13%	+1 bp
Canada 10Y Govt Yield	3.63%	-2 bp

Prior Economic Events

Data	Prior	Cons	Actual
No events available

Today's Economic Events

Data	Prior	Cons	Time
No events available

BoC deliberations show cautious but open path to further hikes; Macklem pledges to "proceed carefully" on additional increases
TSX slips 0.76% to 36,170.50 as CAD weakens to 1.42 on softer oil and US CPI jitters
Curve steepens modestly: 2Y +1 bp to 3.13%, 10Y -2 bp to 3.63% as markets weigh energy-driven inflation risks

Yesterday's Recap

Canadian markets delivered a mixed session on November 10, with the S&P/TSX shedding 0.76% to close at 36,170.50 as energy and rate-sensitive sectors weighed on the index. The loonie weakened, with USD/CAD climbing 0.76% to 1.42, pressured by positioning ahead of the US CPI release. Government of Canada yields moved in opposite directions: the 2-year yield edged up 1 bp to 3.13% while the 10-year eased 2 bp to 3.63%, a modest steepening that reflects near-term policy risk against a softer long-end growth outlook.

WTI crude rose 0.76% to $86.69 and Brent gained 1.46% to $92.83, though both remain well off recent highs as geopolitical risk premia compress. Gold advanced 0.80% to $4,062.60, underscoring persistent demand for inflation hedges. No major Canadian data releases were scheduled, leaving markets to trade on BoC communications and cross-border rate dynamics.

The Day Ahead

The Canadian calendar is light on November 11, with no tier-one domestic releases scheduled, so attention shifts squarely to US CPI and its spillovers into CAD and GoC yields. Traders will watch the US inflation print closely given its implications for Fed policy and the US-Canada rate differential, which has been a dominant driver of USD/CAD. Any upside surprise in US prices could extend the loonie's slide toward 1.43, while a soft print would offer relief to the CAD and front-end yields.

Domestically, market participants will continue to parse the BoC's meeting summary and Macklem's remarks for clues on the December 9 decision. With the policy rate at 2.50% following the October 28 hike, the bar for another move remains data-dependent, and energy-driven inflation risks are the key variable to monitor.

Other Economic Notes

Canada's inflation backdrop remains uncomfortable, with CPI running at 3.09% year-over-year as of September 30, well above the 2% target and driven largely by energy pass-through. The BoC's own survey reportedly flags its rate hikes as a top threat to the economy, highlighting the tension between inflation control and growth preservation. Housing and household leverage remain structural vulnerabilities, and the renewed "rate shock" narrative suggests mortgage renewals will continue to weigh on consumption into 2027.

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Other Economic Notes (continued)

The Canadian dollar's sensitivity to oil prices has been amplified by shifting geopolitical risk premia, complicating the export outlook. With the policy rate at 2.50%, real rates remain modestly restrictive, and the BoC has signaled it is in no hurry to reverse October's hike.

Global Macro News

Oil markets dominated the global narrative, with crude sliding toward two-month lows as US officials downplayed the need for further military action against Iran, compressing the geopolitical risk premium. Brent briefly touched lows near $89.20 before recovering, and the move rippled through commodity-linked currencies including the CAD and the Korean won. US credit card balances are mounting, with Democratic lawmakers pushing to cap interest rates, a signal of consumer stress that could weigh on cross-border demand.

In Europe, ABN Amro posted a 52% jump in quarterly profit, fueled by higher interest rates and an acquisition, illustrating how elevated rates continue to support bank margins globally. The Bank of Canada governor succession is also in focus, with BlackRock and Scotiabank economists cited as contenders, adding a layer of institutional uncertainty to Canadian policy expectations. Markets remain squarely focused on the US CPI print as the next catalyst for global rate expectations.

BoC Watch

The Bank of Canada's October 28 decision raised the policy rate by 25 bp to 2.50%, and the subsequent meeting summary and public remarks from Governor Macklem have emphasized a cautious, meeting-by-meeting approach to further increases. ↓ p.3

Continuation

BoC Watch (continued)

The deliberations reportedly show the committee felt uncertainty did not justify inaction, while Macklem publicly pledged to "proceed carefully" on additional hikes — language that preserves optionality without committing to a preset path. The summary signals that further hikes "might be needed" as energy-driven inflation risks broaden, a notable hawkish tilt given CPI at 3.09%. Markets should read this as a conditional bias toward tightening rather than an imminent move; the December 9 decision will hinge on inflation persistence and energy dynamics.

Quantitative tightening continues in the background, reinforcing the restrictive stance. For fixed income, the guidance supports a steeper front end, and for the CAD, it offers a modest rate-differential cushion against further oil-driven weakness.

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