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MNI BoC Preview, Apr'24: Moving Closer To Rate Cuts But Reluctant To Say So

Inflation has moderated further and the unemployment rate has climbed again but we don't expect the BoC to sound overly celebratory on Wednesday

Central Bank PreviewHomepageBoC - PreviewCentral Bank ReportsMarkets

EXECUTIVE SUMMARY

  • The BoC is unanimously expected to hold its policy rate at 5% for a sixth meeting but there is now a greater likelihood of a softening in tone after disinflationary progress and a climbing unemployment rate.
  • Some analysts even see non-trivial risk of a cut this week whilst BoC-dated OIS has 4-5bps priced.
  • We don’t expect a congratulatory tone from the Bank, but rather only a modestly more dovish tone whilst reiterating there is still work to be done.
  • The aim will be to prevent an overly large easing in financial conditions whilst seeing almost two months of data (including two CPI reports) and the federal government budget on April 16 before the June decision.
  • The market has circa 75bp of cuts priced for 2024, in sizeable part courtesy of Canada’s linkages to the US, but the next couple of meetings could put this to the test.
  • We expect markets will be particularly sensitive to the tone around inflation moderation and labour market rebalancing over the simultaneous statements before the Q&A in the subsequent press conference.

PLEASE FIND THE FULL REPORT HERE:

BOCPreviewApr2024.pdf

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EXECUTIVE SUMMARY

  • The BoC is unanimously expected to hold its policy rate at 5% for a sixth meeting but there is now a greater likelihood of a softening in tone after disinflationary progress and a climbing unemployment rate.
  • Some analysts even see non-trivial risk of a cut this week whilst BoC-dated OIS has 4-5bps priced.
  • We don’t expect a congratulatory tone from the Bank, but rather only a modestly more dovish tone whilst reiterating there is still work to be done.
  • The aim will be to prevent an overly large easing in financial conditions whilst seeing almost two months of data (including two CPI reports) and the federal government budget on April 16 before the June decision.
  • The market has circa 75bp of cuts priced for 2024, in sizeable part courtesy of Canada’s linkages to the US, but the next couple of meetings could put this to the test.
  • We expect markets will be particularly sensitive to the tone around inflation moderation and labour market rebalancing over the simultaneous statements before the Q&A in the subsequent press conference.

PLEASE FIND THE FULL REPORT HERE:

BOCPreviewApr2024.pdf