🏦🇨🇦Cable FX Macro Weekly Note: Bank Of Canada Sept. Rate Decision

**As seen in Risk In The Week report 09/01/23, subscribe at cablefxm.co.uk/reports

The benchmark rate was lifted by 25bps to 5.0% last time the Bank of Canada met, this was in line with economists’ estimates. Back in July, the central bank’s statement said it had pushed its CPI return to target by 6 months later in mid-2025, and noted that progress towards the 2% inflation target could stall. The BoC said it would have to assess data and did refrain from providing guidance on the rate path, the central bank sees inflation rising by 3.7% in 2023 and 2.5% in 2024. The board lifted its consumption demand forecast for both this year and next as demand was said to be proving more persistent. The BoC now sees a GDP growth rate of 1.8% in 2023 and 1.2% in 2024. We remind you that we have seen a deterioration in macro sentiment, Tier-1 data has been turning softer and more recently undershooting expectations, this has been a persistent trend since July. Second quarter GDP surprised economists as it contracted by 0.2%, the bank lending survey declined from the first quarter to 7.6, and the labour market has seen job shredding while the jobless rate ticks higher. Economists at RBC expect the Bank of Canada to hold rates unchanged after the 2Q GDP figures, they noted very low chances for a rate hike preceding the release. RBC’s view is supported by a more balanced labour market with a higher unemployment rate, a stabilization in housing market activity, and a headline CPI rate within the BoC’s forecast. However, they noted that core inflation remains above what the central bank had hoped for in July.