A Bank of Canada rate hike goes from fringe to favourite

Traders now put 84% on a quarter-point rise on 28 October, up from 18% on 15 October.

In one line: The Bank of Canada raises rates by a quarter point on 28 October, and traders leave a hold at 15% as the only real alternative.

Traders on Kalshi have turned a Bank of Canada rate rise from an outside chance into the expected result. The contract on a quarter-point hike at the bank's 28 October meeting stood at 18% on 15 October and touched a low of 15% on 18 October. Since that low it has climbed 69 points to 84%, a gain of 66 points over the 7 days. The last 24 hours alone added 14 points.

The rest of the event leaves little room for anything else. A hold trades at 15%. A hike larger than a quarter point sits at 2%, and each of the two cuts at 1%. The contracts measure moves in basis points, hundredths of a percentage point. Traders now see a two-way choice between a quarter-point rise and no change, with almost nothing on a bigger move in either direction.

The shape of the move matters more than its size. The contract reached its 7-day high of 85% on 22 October and sits one point below it, so the rise has held. The 14-point gain in the last 24 hours shows the move still accelerating with the meeting 6 days off. The 2% on a larger hike shows traders hold a firm view on the size of the step as well as its direction.

The Bank of Canada raises its rate by a quarter point on 28 October, the outcome the 84% price already makes the clear favourite. A price one point below its weekly high with 6 days left shows traders have not wavered. The call is wrong if the bank leaves its rate unchanged on 28 October, and an early warning would be the hike contract falling below the hold contract before the meeting.