Bank of Canada: Rates likely to remain at 4.5% this year, before easing in 2024 – CIBC
|The January meeting of the Bank of Canada resulted, as expected, in a 25 basis points rate hike. BOC's Tiff Macklem said it is time to pause and assess whether the policy is sufficiently restrictive. Analysts at CIBC expect that interest rates will stay at 4.5% throughout the balance of this year, before being eased gradually in 2024.
BoC moves onto the sidelines
“The Bank of Canada hiked interest rates one more time, but gave a more explicit signal than anticipated that it was now moving onto the sidelines. The 25bp increase, taking the overnight rate to 4.5%, was well anticipated by the consensus. However the change in guidance was not, with the Bank now explicitly stating that if the economy evolves as it expects, then the policy rate will be kept on hold at its current level.”
“With the Monetary Policy Report's forecasts for GDP growth and inflation little changed from October and a touch stronger than our own, we suspect that the economy will indeed evolve in-line or even a bit weaker than the Bank suspects, and that today's hike in interest rates will mark the final one of this cycle.”
“We had expected that today's 25bp move would be the final one for this cycle, and the change in the Bank's guidance only reaffirms that belief. Even though there is still a slight bias within its communication towards raising interest rates further, today's statement suggests that the Bank will sit on the sidelines for now and wait for the accumulation of a few month's worth of data rather than necessarily reacting to near-term surprises.”
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