The Bank of Canada is due to make its final decision at the top of the hour. Economists expect no change from 4.50% overnight and market rates “no change” at 95%.
BOC is now in watch-and-hold mode after a series of highs. The housing market has slowed dramatically and prices have fallen from their February 2022 peak but supply remains constrained.
Eyes will be on the statement and how the call develops around the conditional discontinuance, especially given that the employment numbers were very strong and first-quarter growth will be stronger than the BOC expected.
The text of the last paragraph of the statement is as follows:
In its January decision, the Board of Governors indicated that it expects to maintain the policy interest rate at its current level, provided that economic developments broadly evolve in line with monetary and fiscal policy expectations. Based on its evaluation of recent data, the Board of Directors has decided to maintain the policy rate at 4%. Quantitative tightening complements this restrictive stance. The Board will continue to evaluate economic developments and the impact of previous interest rate increases, and stands ready to increase the policy rate further if necessary to bring inflation back to the 2% target. The Bank remains firm in its commitment to restoring price stability to Canadians.
Overall, I don’t see this being a big driver for the market and the fallout from the US CPI will continue to dictate today’s trading, including the Canadian dollar. If there was a surprise, it would be that BOC is comfortably moving to the sidelines.
Moreover, 23 out of 31 economists in a Reuters poll expect the BOC to remain on hold through the end of the year with 7 expecting a single cut.
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