I posted the view from CIBC, expecting an on-hold decision from the Bank today:
Scotia Economics, on the other hand, expects a 25bps rate hike at this meeting. In brief:
Along with "continued guidance that leaves the door open to further tightening by largely retaining something either identical or very similar to the final paragraph’s guidance in recent statements that has said":
- “Governing Council continues to assess whether monetary policy is sufficiently restrictive to relieve price pressures and remains prepared to raise the policy rate further if needed to return inflation to the 2% target.”
The BoC has been fairly clear that its conditional hold since January relied upon developments conforming to its expectations. That clearly has not been the case.
GDP growth has surprised to the topside, and forecasts are for more of the same. Says Scotia:
- What’s more is that the details to the growth figures continue to point toward robust growth in consumer spending—including the most interest-sensitive types—and against fears that higher rates would take down spending.
On inflation:
- All of the main measures are running at 4%+ as they jumped higher in April which is not something the BoC can afford to ignore. The only period of marked improvement was over 2022H1 and since then these measures have been moving sideways at remarkably sticky rates notwithstanding the fact it has already been ~20 months since bond market tightening began in earnest and in anticipation of policy rate hikes.
