Wage pressures still muted

The latest wage data indicate that there’s little risk of inflation overshooting the Bank’s 2% inflation target anytime soon. For this reason among others, the Bank has nothing to gain by raising interest rates again early next year as markets expect. We think the Bank will instead bide its time until more is known about the impact of the tougher mortgage lending regulations, due to take effect at the start of next year, and the outcome of the NAFTA renegotiations. Given the upcoming Mexican elections and the US midterms, we can see the Bank of Canada singing the same cautious tune until the middle of next year.