BOC: Odds of ‘micro rate cut’ rise amid covid lockdowns – Reuters


Money markets have raised their bets on a potential Bank of Canada (BOC) micro rate cut' next week, as stricter COVID-19 restrictions weigh on the prospects of an economic rebound later this year, per Reuters.

Key takeaways

“Reflecting rate cut risk, Canada’s three-month overnight index swap rate has moved below the 0.2% level where the overnight rate has been settling. It has eased 4 basis points since November to trade at about 0.17%.”

“A rate cut could add stimulus by reinforcing already low borrowing costs and checking further gains for the Canadian dollar.”

“Adjusting the asset-purchase program and setting yield-curve targets are other easing options the BoC has flagged, seeing risk of economic scarring if the recovery takes too long.”

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