Notes From the Desk – Bank of Canada – A Hawkish Hold
The Bank of Canada (BoC) opted to hold the overnight rate steady at 5% while continuing the process of reducing its balance sheet (quantitative tightening).
The Bank pointed to the softness in recent growth and labour markets as evidence of the lagged effects of monetary policy. But they kept the door open for future hikes, as they remain concerned with inflation persisting at 3.5% and little downward momentum in recent months.
The bond market is currently pricing in a 50% chance of one more hike this year, with the possibility of cuts not occurring until July of next year.
Today’s decision and announcement should not have a material impact on yields.