<p>Earlier posts on the Bank of Canada monetary policy decision today (read from the bottom up for chronological order):</p><ul><li><a href=”https://www.forexlive.com/centralbank/macklem-this-is-a-conditional-pause-dependent-on-economy-developing-as-forecast-20230125/” rel=”follow” target=”_self” class=”article-link”>Macklem: This is a conditional pause, dependent on economy developing as forecast</a></li><li><a href=”https://www.forexlive.com/centralbank/the-full-statement-from-the-january-2023-bank-of-canada-rate-decision-20230125/” rel=”follow” target=”_self” class=”article-link”>The full statement from the January 2023 Bank of Canada rate decision</a></li><li><a href=”https://www.forexlive.com/centralbank/bank-of-canada-rate-decision-450-vs-450-expected-20230125/” rel=”follow” target=”_self” class=”article-link”>Bank of Canada hikes rates by 25 bps as expected and signals intention to now hold</a></li></ul><p>The key points on the BoC via RBC:</p><ul>
<li>Bank of Canada hiked overnight rate by 25 bps to 4.5%, but signaled further increases are not expected</li><li>Positive signs inflation is easing and a slowing economy have increased confidence that interest rates are already high enough</li><li>BoC still ‘data-dependent’ but we expect will now leave the overnight rate unchanged for the rest of this year</li></ul><p>
On the conditionality of the pause:</p><p>
With inflation still running
very hot, Governor Macklem confirmed that the central bank is more
concerned about upside than downside risks to inflation. The pause
in interest rate increases is conditional on the outlook evolving as
expected and inflation pressures continuing to ease.
</p><p>(bolding is RBCs). </p><p>—</p><p>CAD weakened. The policy divergence with a still-hiking Fed should be a tailwind for USD/CAD further:</p>
This article was written by Eamonn Sheridan at www.forexlive.com.
