Local Analysts On BoC [2/2]

Desjardins, RBC and TD imply base case for rates on hold but with risks of moving higher

• Desjardins: We see this as the peak for rates in this cycle. Today’s US inflation data provides evidence that global inflationary pressures are dissipating. Furthermore, as we’ve pointed out before, the BoC’s balance sheet is set to shrink materially in the months to come, with a large amount of bonds maturing and rolling off. That should obviate the need for another rate hike in September by further tightening financial conditions.
• RBC: Our own outlook is a more pessimistic one than the central bank's. That should be enough to push the BoC back on the sidelines with no additional interest rate increases this year. But they are clearly willing to hike again at the next decision in September if inflation in particular doesn't show further signs of easing.
• TD: The onus is on the incoming data, which we think will show enough weakness over the coming months for policymakers to remain on hold for the next few quarters. Should household spending prove more resilient than policymakers anticipate, this would offer a pathway to further rate increases.