• Notes from the Desk | Bank of Canada Meeting - Steady As She Goes

Notes from the Desk | Bank of Canada Meeting – Steady As She Goes Mar 08 2023

Notes from the Desk: Bank of Canada Meeting – Steady As She Goes

As expected, the Bank of Canada (BoC) remained on pause and kept the overnight rate at 4.50%.

Noteworthy:

  • The BoC sees signs that higher rates are slowing growth.
  • While CPI is still too high, recent data shows that core inflation is heading in the right direction.
  • The strong labour market could keep inflation on the higher side, which is why the BoC is keeping the door open to resuming rate hikes in the future.
  • The BoC showed no signs of concern with the CAD/USD FX rate, despite the recent losses incurred by the loonie in response to the prospects of US rates plateauing 75bps above domestic levels.

 

Implications:

  • Canadian rates have risen in sympathy with the US market pricing in a higher terminal rate.  We would not be surprised to see CAD yields reverse some of that move.
  • With this decision date behind us, the direction of rates will now be driven by March’s inflation and employment data.
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