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Bank of Canada holds at 2.25%, leaves USD/CAD in consolidation
BoC kept its policy rate at 2.25% for a sixth straight meeting and toned down guidance, while analysts cited Canada’s easing growth and core inflation near 2% as reasons for limited CAD catalysts.
The Canadian dollar has moved into a consolidation phase versus the US dollar after a volatile period, according to FXStreet. The pair has been supported by the Bank of Canada’s decision to hold its policy rate at 2.25% for a sixth consecutive meeting, which helped steady the initial USD/CAD dip after softer US inflation data.
FXStreet notes that market focus is shifting to the BoC’s updated forecasts and guidance to gauge the next move for USD/CAD. In particular, BBH said Canada’s cooling economic momentum reduces the urgency for additional hikes, and TD Securities pointed to the BoC’s revised guidance as having little to drive a near-term CAD rally.
The article highlights that under BoC projections, real GDP growth is expected to slow from an annualized 2.5% in the second quarter to 1.5% in the third quarter, with core inflation around 2%. BBH added that current market pricing for 50 basis points of policy tightening over the next 12 months may be overextended, leaving room for hike expectations to be trimmed.
FXStreet also reports that the BoC watered down its forward guidance by removing references to rate-cut risks and consecutive hikes. That neutral stance may reduce sudden currency swings, but it leaves the CAD without a clear domestic policy trigger to push it beyond its recent trading range, while analysts described USD/CAD as stabilizing after benign US CPI and PPI reports.