The modestly higher-than-expected inflation reading for October was enough for money markets to price in higher odds that the Bank of Canada will only cut interest rates by 25 basis points next month.
Here’s how implied probabilities of future interest rate moves stood in swaps markets following today’s 830 am ET inflation report, according to LSEG data. The overnight rate currently resides at 3.75 per cent. While the bank moves in quarter point increments, credit market implied rates fluctuate more fluidly and are constantly changing. Columns to the right are percentage probabilities of future rate moves.38.
Money markets are now pricing in one full percentage point of more easing by the Bank of Canada by December 2025. That indicates there will be less interest rate relief coming in the months ahead than what had been expected. Earlier this fall, markets were pricing in 150 basis points of more cuts to come by the end of next year.