Bank of Canada stays with a neutral policy stance

The Canadian Dollar remained firm on Wednesday against the US Dollar despite the Bank of Canada (BoC) keeping its policy rates steady at 4.5%. Bank of Canada Governor Tiff Macklem believes that the current monetary policy is restrictive enough to tame sticky inflation.

The Bank of Canada also ignored upbeat Employment data, released last week, and maintained the status quo, in spite of the fact that upbeat demand for labor could fuel labor earnings and assures a recovery in Canada’s inflation. Analysts at TD Securities expect “The Bank of Canada’s interest rate to remain at 4.50% for all of 2023, as we do expect growth to slow markedly in Q2. That said, if the expected softening in the labor market does not emerge, the Bank of Canada may have little choice but to tighten it again. With markets likely to give the Bank of Canada a pass in June, we see more risk for rate hikes in the July and September meetings.”