The Bank of Canada (BoC) has raised its target for the overnight rate to 4.75%, in line with its ongoing policy of quantitative tightening. The bank's decision is in line with forecasts, which anticipated a 25 basis points rate hike. The data is not surprising, but the outlook for further rate increases will depend on additional inflation data. The Bank of Canada also assumes that CPI prices will return to the target level six months later, but for now, further increases are not anticipated.
Global inflation is easing due to lower energy prices and a decline in goods price inflation, but strong demand and tight labor markets are leading to persistent inflationary pressures in services. Canada's economy has shown unexpected strength, with robust consumption growth and signs of excess demand, particularly in the housing market. As interest rates continue to increase, the Bank expects economic growth to slow. Inflation in Canada has eased but remains a concern, and the Bank projects it to gradually decline to 2% by mid-2025.
USDCAD, M15 interval, source xStation 5
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