Monday Market Minute | Oct 24, 2022

BoC hikes 50bps to 3.75% but signals the end of the tightening cycle may be approaching

What Moved

The Bank of Canada raised the overnight rate by 50 basis points to 3.75% on October 26 — the sixth hike of 2022 — but the accompanying statement introduced a subtle but important shift in tone. While Macklem maintained that further increases would be needed, the language moved from "forceful" to suggesting the Governing Council was "getting closer" to the end of the tightening phase. Markets interpreted this as a pivot signal, though expectations for at least one more hike in December remained firmly priced in.

Why It Matters

The hint of a possible pause created a bifurcated outlook for private markets. If the BoC was near its terminal rate, the window for private credit's floating-rate yield pickup was approaching its peak — meaning investors who had not yet allocated would need to move quickly to capture the full benefit. Simultaneously, the prospect of peak rates offered relief to leveraged PE and real estate positions, where carrying costs had escalated dramatically. The next 90 days would determine whether rates plateaued or kept climbing.

Signal to Watch

The December BoC decision — whether the hike would be 25 or 50 basis points, and whether it would be explicitly framed as the last of the cycle.

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