Home›Forex›Central Banks›Bank of Canada keeps rates at 2.25%, points to Q2 rebo…

Bank of Canada keeps rates at 2.25%, points to Q2 rebound

The Bank projects GDP growth rebounding to a 2.5% annualized pace in Q2 as inflation uncertainty tied to energy costs remains the key watch item.

Reported · Written up by our desk · Central Banks

The Bank of Canada held its overnight rate unchanged at 2.25% for a sixth consecutive meeting, but its updated economic outlook shifted to a more constructive tone on near term growth, according to Action Forex.

In that outlook, the central bank expects GDP to rebound at a 2.5% annualized pace in Q2, citing stronger exports, resilient consumer spending, and tentative signs of stabilization in housing markets, while still noting excess supply and soft labor market conditions.

Inflation remains the main source of uncertainty, with headline CPI still above 3% largely due to higher energy costs linked to the conflict in the Middle East. The Bank expects inflation to moderate over coming quarters, while flagging a modest upside risk from higher crude prices since its forecast cut off date.

Action Forex also noted the Bank removed a previous reference to the possibility of “consecutive” rate hikes if inflation pressures broadened, and markets took that as confirmation the policy stance stays on hold. In the session after the decision, bond yields were little changed and the Canadian dollar gained about a cent versus the U.S. dollar, while market pricing continued to imply low odds of a policy move by year end.

Latest closeWTI crude $90.47 ▼1.9%

More like this

Sources