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Dovish FI Reaction To BOS/CSCE Surveys

CANADA
  • GoCs see a dovish reaction to the BOS/CSCE surveys, with 2YY rallying a further 4bps for now down almost 10bps on the day with the belly also rallying 7bps. USDCAD meanwhile largely looks through the report with the US out.
  • Overall confidence in the Business Outlook Survey fell further in Q4, at +0.1 touching new lows since 3Q20 albeit still close to average levels through 2019.
  • Most firms expect a mild recession in Canada this year, with increases in the share of those worried about demand and credit availability along with reduced supply chain concerns.
  • Inflation expectations were somewhat mixed. A record 84% of firms expected inflation to average above 3% over the next two years having dipped 1pp to 77% back in Q3. However, actual expectations eased to an average 4.18% (from 4.26) over two years and the additional more timely Business Leaders’ Pulse saw 2-year ahead inflation at 2.95% (from 3.14) and 5-year ahead at 2.41% (from 2.49).
  • Further, average year-ahead expected wage increases cooled another 0.2pps to 4.7% Y/Y having potentially peaked at 5.8% in Q2.


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