Notes from the Desk – Bank of Canada: This is the End.
To quote the Doors, ‘this is the end, beautiful friend…the end.’ At least for now.
After delivering a 25 bps hike and bringing the overnight rate to 4.5%, the Bank of Canada (BoC) expects to hold here as it assesses the impact higher rates will have on the economy.
In terms of what the BoC expects going forward, there was a slight upgrade to their GDP forecast, however, they have become more optimistic that inflation will fall quickly, reaching 3% by the middle of the year and dropping to 2% in 2024.
Although the Bank reserved the right to increase rates further if inflation remains sticky, the bond market is priced for cuts to start in the summer.
We expect bond yields to fluctuate in a narrow range as investors await the much-anticipated drop in inflation.
