🏦🇨🇦Cable FX Macro Weekly Note: Bank of Canada Rate Decision

**As seen in Risk In The Week report 06/02/23, subscribe at cablefxm.co.uk/reports

Back in April, the Bank of Canada held its key policy rate unchanged at 4.5%, this was in line with market expectations. The central bank's last hike was in January and has not adjusted monetary policy since then. The BoC said it expects inflation to hit 3% by mid-2023 and 2.1% by end of 2024, GDP growth is now seen at 1.4% in 2023 and 1.3% in 2024. Regarding inflation, the statement mentioned that services inflation remains the biggest upside risk to the outlook, they added that the BoC is ready to hike rates again. Also, the BoC indicated that population growth is boosting both supply and demand, while the labour market was said to remain too tight. The latest inflation figures showed Canadian headline consumer prices at 4.40% Y/y, the core figure is now at 4.10%, this leaves inflation a bit more than 1.0 percentage point above the BoC’s target range. The median expectation compiled by Bloomberg sees CPI falling within the band by Q4, economists project headline CPI slowing to 2.1% Y/y by this time next year. The desk at J.P. Morgan noted that Canada screens as having the lowest degree of CRE loans in the G10, they add that this leaves the banking sector in a relatively better position than its U.S. peers. Analysts at ING focused on the fact that the market is pricing a full 25bps rate hike by September, they expect the BoC to hold rates in June while delivering a hawkish statement. ING is open to the idea of a July rate hike by the BoC.