**As seen in Risk In The Week report 12/01/23, subscribe at cablefxm.co.uk/reports
The Bank of Canada held its policy benchmark rate at 5.0% back in late October, the decision matched economists' estimates. Most of the deceleration in consumer prices has been seen according to the central bank’s projections, they expect prices to rise at 3.0% next year before falling to 2.2% in 2025, this compares to the latest data point of 3.1%. Core inflation has eased to 2.7% Y/y in October. On the growth front, the BoC sees the economy rising by 0.9% next year before expanding by 2.5% in 2025, both projections stand relatively better than the consensus median. Economists pencil a 50.0% chance of a recession in Canada over the next 12 months, according to data compiled by Bloomberg. More recently, we have seen the Canadian unemployment rate rise to 5.7% while the monthly pace of job growth has cooled down. Also, both 2Q and 3Q recorded back-to-back output contractions, the latter posted an annualized decline of 1.1% vs the estimate of +0.1%. Economists at TD Securities said that the prior quarter's output upward revision and a stronger October flash print are easing recession concerns. The desk believes there is no reason for the BoC to hike again as the central bank expects below-trend economic growth which will push inflation closer to target. Upcoming data developments will give the BoC time to prepare for rate cuts, TD forecasts the first reduction to come by April and a net of 100bps of cuts in 2024.
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