Forget a 50 basis point cut? How market bets and economist views for the next BoC rate move have shifted in the wake of today’s jobs reportToday’s stronger-than-expected Canadian jobs report has shifted bets in money markets for the next Bank of Canada rate move later this month, with traders now giving greater likelihood to a 25 basis point cut instead of a larger 50 basis point reduction to the central bank’s trend-setting overnight rate.
Here’s how implied probabilities of future interest rate moves stand in swaps markets, according to LSEG data following today’s data release. The overnight rate now resides at 4.25%. 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. The second table to the bottom is a breakdown of probabilities for the size of a cut on Oct. 23.
However, population growth once again outpaced hiring in September, meaning the headline employment rate fell to 60.7%, reinforcing our view that there’s a growing excess supply of workers. The one-tick drop in the unemployment rate to 6.5% was mostly the result of a falling labour force participation rate, which declined 0.2 percentage points.