MNI BoC Review - Jan'24: A Partial Pivot  With Inflation Still A Concern

EXECUTIVE SUMMARY

• The BoC left its overnight rate at 5%, whilst the totality of some conflicting messages across the suite of communications lent marginally dovish in our view (analyst summaries sit either side of that).
• The statement(s) noted persistence in underlying inflation but somewhat dropped the explicit hiking bias in place since it last hiked in July and which investors haven’t expected to be acted upon for some time. The presser opening statement importantly indicated a pivot in discussion to how long rates need to stay at 5%, but the Q&A pushed back on near-term cuts.
• Economic forecasts were softer in the near-term, including seeing the economy currently in modest excess supply, but further out weren’t notably different with inflation seen easing to 2% sometime in 2025.
• One of the biggest surprises was the lack of discussion on slowing QT: “we’re certainly not there yet”.
• Landing with stronger than expected US flash PMIs, the Can-US 2YY differential fell a notable 6.5bps to -36bps, whilst USDCAD pushed almost 100 pips higher on the day with CAD bottom of the G10 FX pack.

PLEASE FIND THE FULL REPORT HERE:

BOCReviewJan2024.pdf