Canada's hot inflation and recovering job market are raising pressure on the Bank of Canada to hike interest rates ahead of schedule, with investors looking to a policy announcement this week for clues that the central bank is turning more hawkish.
The BoC, led by Governor Tiff Macklem, is expected on Wednesday to raise its inflation forecast and to largely end stimulus from its pandemic-era bond buying program, starting a countdown of sorts to the first interest rate hike since October 2018.
The Bank of England could bow to inflation pressures and become the first major central bank to raise rates in November, while there is a growing view that the U.S. Federal Reserve will feel compelled to tighten policy earlier and more aggressively than it would like. The Canadian dollar has climbed in recent days to a four-month high near 1.23 per greenback, or 81.30 U.S. cents, while the gap between Canadian and U.S. 2-year yields has doubled since last month to 41 basis points in favor of the Canadian bond.
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