As expected, the BoC held the overnight rate at 2.25%. The accompanying statement and press conference were a whole lot of, ‘we’re not moving rates anytime soon’.
Notables.
Governor Macklem’s press conference was a masterclass in saying a lot while saying nothing.
- The BoC’s projections are ‘vulnerable to US trade policies and geopolitical risks’ with CUSMA being the biggest wildcard.
- Their forecasts are based on current tariff levels, making rate markets sensitive to trade headlines.
- Since the October Monetary Policy Report (MPR), geopolitical risks have heightened, and there is more unpredictability in US policy.
- A loss of independence of the Fed would affect us all
The bottom line.
- The base case is that the BoC stays on hold for the time being.
- The bond market is pricing a 50% chance of a hike later this year. But with inflation easing and concerns about growth and US trade policy, it appears that, in the near term, the BoC is leaning more towards a cut than a hike.
