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🏦🇨🇦RPT-- Cable FX Macro Weekly Note: BoC January Rate Decision

**As seen in Risk In The Week report 01/19/24, subscribe at cablefxm.co.uk/reports

The Bank of Canada held its overnight rate at 5.0% back in December, there have been no changes in policy since July when rates were lifted by 25bps. Headline inflation has been ranging since the Summer, the last read ticks at 3.4% Y/y, and the core metric read is 2.6%. Looking ahead, the central bank expects headline prices to ease to 3.0% by the end of the year, we will receive a fresh batch of forecasts in the January meeting. Projections will bring colour to how is the central bank balancing the equation to meet its price target while preventing growth from deteriorating. We remind you that BoC's Governor Macklem recently hinted at policy rate cuts, it could be possible that their inflation projections are due to be revised lower. On the jobs front, the Canadian economy recorded the softest print since July, missing economists' estimates, and the unemployment rate stayed unchanged at 5.8%.

Analysts at TD Securities warned that the December CPI print does not point to imminent rate cuts as price progress seems to have halted. However, TD is projecting the Canadian economy to have cooled enough for the BoC to start easing by the spring, they expect the first rate cut in April. RBC strategists noted risks tilted towards a less dovish statement/presser than what the market is currently pricing, if these materialize, they expect yields to move higher while rate-cut bets are pared.


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