🏦🇨🇦Cable FX Macro Weekly Note: BoC Interest Rate Decision

**As seen in Risk In The Week report 04/07/23, subscribe at cablefxm.co.uk/reports

The March monetary policy decision saw the Bank of Canada leaving the overnight rate unchanged at 4.5%, this was in line with market expectations. In the statement, the central bank said it could hike rates again if needed, while it signaled that inflation remains high and the jobs market is very tight. The BoC removed its previous reference to stable CAD vs USD, the Canadian dollar had weakened circa 7% in 12 months heading into the March meeting, this is relatively firm when compared to the NOK and JPY declines of more than 15.0%. The BoC sees growth slowing to 1.0% this year and expanding by 1.8% in 2024, inflation is expected to ease to 3.6% in 2023 and fall back within the target range by 2024. More recently, we received the BoC surveys, the desk at RBC says they point to softening along multiple lines. This falls with RBC’s base scenario of BoC holding rates through the remainder of this year. Analysts at Goldman Sachs warned that the BoC has a tendency to revise both its estimate of neutral rate and the potential growth forecast in the April MPR, they add that this has the potential of bringing a surprise on Wednesday. Goldman Sachs sees the possibility of a revision to the estimate of neutral rate given that inflation has been persistent, it currently stands at a midpoint of 2%-3%.