BoC Preview: Forecasts from eight major banks, staying on the sidelines

The Bank of Canada (BoC) is set to announce its interest rate decision on Wednesday, April 12 at 14:00 GMT and as we get closer to the release time, here are the expectations as forecast by the economists and researchers of eight major banks, regarding the upcoming announcement.

The BoC is likely to leave the overnight target rate unchanged at 4.50% for the second straight meeting in April. The BoC’s updated projections and Macklem’s words are set to offer fresh cues on policy path.

ING

“The BoC is widely expected to leave rates unchanged having signalled that rates are already likely at the peak. The downside risks for global growth in the wake of recent banking turmoil only make it more likely that the next move from the central bank will be an interest rate cut.”

TDS

“We expect the BoC to hold the overnight rate unchanged at 4.50%, as the Bank balances strong Q1 GDP tracking with soft survey data and the uncertain impacts of US banking turmoil. Forward guidance should remain open-ended. 

RBC Economics

“The BoC likely won’t make any change to the overnight interest rate. The central bank is widely expected to make a second consecutive decision to hold. This is despite economic growth that’s been more resilient than expected so far this year. So why hold interest rates again when the economy is still running hot? Inflation (and the broader economy) are still running too hot for the BoC to actively consider cutting interest rates but staying on the sidelines, for now, looks like an easy decision to make.”

NBF

“We expect the BoC to keep its policy rate unchanged at 4.50% as it did back in February. In its statement, the Bank is likely to stress the conditionality of its pause and it should leave the door open to further rate increases if needed to get inflation back to target.”

CIBC

“There won’t be any surprises for markets if, as we expect, the BoC leaves rates unchanged. But there’s just too much momentum in recent indicators for the Bank to eliminate its warning that additional hikes could still be required. There could be some acknowledgement that the non-inflationary level for real GDP could be higher than their last estimate, given the population and labour force surge we’ve just seen. We’re also due for an update of the neutral rate. The Fed’s policy committee left the ‘long run’ projection for the Fed funds rate unchanged at 2.5%, and that has a major impact on the Canadian neutral rate calculation by the BoC, which could therefore retain that same figure as the midpoint of its estimated range.”

BBH

“BoC is expected to keep rates steady at 4.5%. A cut seems very unlikely, especially after last week’s solid jobs report for March. Looking ahead, between 2-3 cuts by year-end are still priced in, which is also highly unlikely.”

Wells Fargo

“We expect the BoC to hold its policy rate steady at 4.50% for the second meeting in a row. We do not expect the Bank of Canada to raise rates further, but nor do we expect the central bank will be in any rush to lower its policy rate either. For now, we see Bank of Canada monetary policy as comfortably on hold at the April monetary policy meeting.” 

Citi

“BoC policy rates are very likely to remain on hold at 4.5% this week, despite increased uncertainty around the global growth outlook since the BoC’s last meeting on March 8. While the BoC should unsurprisingly express some caution over recent developments, we see hawkish risks for markets seemingly expecting a very dovish shift from the BoC with cuts in the policy rate sometime soon. Still sticky-strong core inflation, stronger than expected H1 growth, and further hikes from the Fed will likely lead the BoC to raise rates again in June. Higher growth forecasts and core inflation still running consistently in the 3.5-4% range imply hawkish risks for the adjustments in the policy statement. The characterization of inflation should continue to highlight both that 4-5% wage inflation and 3-month core inflation of around 3.5% are too strong to be consistent with the 2% inflation target. Hence, there should not be much change in the core message of the policy guidance, which should continue to say the Governing Council ‘is prepared to increase the policy rate further if needed to return inflation to the 2% target’.”