The markets are convinced that the Bank of Canada will hike its overnight rate by another 25bp to 1.75% at next week’s policy meeting and it isn’t hard to see why. Economic growth has been solid this year and probably a touch stronger than the Bank’s expectations in the third quarter, with previous weak links such as investment and exports showing signs of a resurgence. Above-potential growth means the economy is operating close to capacity, at a time when core inflation is already slightly above the 2% mid-point of the target range.
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