**As seen in Risk In The Week report 06/03/24, subscribe at cablefxm.co.uk/reports
The Bank of Canada held rates steady back in April, the overnight policy rate was unchanged at 5.0% as the central bank faced a contracting labour market in March and prices easing back into the target range. The April MPR revised growth higher, the board now pencils GDP expanding by 1.50% in 2024 before accelerating to 2.20% in 2025. On the price front, the mandate is met into 2025, the BoC expects inflation to rise 2.60% this year before easing to 2.20% in 2025. More recent data showed prices slowing to 2.7% Y/y in April, this was in line with economists' projections. Also, this month saw an addition of 90.4K jobs, however, the unemployment rate came in unchanged at 6.1%. It is likely that the next MPR could bring downside revisions to output as 1Q data saw an annual rise of 1.7% missing the 2.2% estimate, the BoC had penciled average growth of 2.0% in 2H.
The desk at Scotiabank reminded us that while there are 25bps of rate cuts priced in for Wednesday, the BoC doesn't really care about disappointing markets. Scotiabank said that holding rates is the best option for the central bank, as doing so would signal a massive communications misstep. Heading into the June meeting, swaps price in about 70bps of policy easing this year, and a July cut is fully priced in.
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