The Bank of Canada left rates unchanged as expected at 5.00% but appears to be slowly backing away from talk of further rate hikes. The statement accompanying the decision sees inflation returning to 2% in late 2025 with the economy growing just 0.9% in 2024.
"There is growing evidence that past interest rate increases are dampening economic activity and relieving price pressures," the BOC statement said. "A range of indicators suggest that supply and demand in the economy are now approaching balance."
The US dollar rose above 1.3800 versus the Canadian dollar, which is the highest since the US banking worries in March. A further rise above 1.3862 would be the highest level of the year.
The Bank of Canada did maintain its hawkish bias, saying it's prepared to raise rates further if needed, highlighting stubbornly high core inflation.
Despite that, USD/CAD is up about 35 pips since the decision.
The announcement was delivered into a turbulent global market. Soft earnings from Google and others today soured equity sentiment with the Nasdaq down 1.4%. A strong US new home sales report was also released at the same time as the BOC decision, boosting the US dollar and Treasury yields broadly.
The loonie will remain in focus in the hour ahead with Bank of Canada governor Tiff Macklem set to hold a press conference at 11 am ET.
