Futures markets are starting to price in interest rate hikes from the Bank of Canada this year as high gas price spark a rise in inflation.
Markets have raised their bets on a Bank of Canada rate hike, assigning a 20% chance of one in April as the Iran war shows no sign of abating and oil prices rise.
The markets had previously priced in a 4% chance of an April rate increase.
Beyond April, bets are growing that Canada’s central bank will raise interest rates a total of 75-basis points by year’s end to combat a resumption in inflation.
Previously, the markets had priced in only one 25-basis point rate increase in December of this year.
Traders have pivoted from expectations of interest rate cuts to hikes since U.S.-Israeli strikes on Iran began on Feb. 28, sending crude oil prices up more than 30% as a result.
The Bank of Canada recently elected to keep its trendsetting overnight interest rate at 2.25%. But Governor Tiff Macklem flagged inflation risks caused by the Iran war.
The central bank next decides on interest rates April 29.
