Bank of Canada Rate-Hike Odds Rise Before Year-End as Analysts Flag 24% Average Bank Stock Drawdown
Updated
Updated · Financial Post · Sep 21
Bank of Canada Rate-Hike Odds Rise Before Year-End as Analysts Flag 24% Average Bank Stock Drawdown
3 articles · Updated · Financial Post · Sep 21
Summary
A Bank of Canada rate increase before year-end now looks more likely after policymakers warned that war-driven energy disruption is raising the risk of persistent inflation.
Seven straight holds left the policy rate unchanged in early September, but last week's Fed move to 3.75%-4% and renewed inflation pressure have shifted expectations toward another hike.
CIBC said Canadian bank stocks fell 24% on average across the past seven BoC hiking cycles, with drawdowns typically lasting eight to nine months and ranging from 14% to 35%.
Analysts say this cycle may differ because Ottawa is pushing energy, defence and other strategic sectors to attract C$1 trillion in investment, potentially lifting commercial lending even if consumer loans weaken.
National Bank and CIBC both favor selective exposure over the whole sector, highlighting TD for margin upside and balance-sheet capacity, while CIBC also points to RBC as a defensive pick.