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Executive Summary:

  • The Bank of Canada kept rates and policy unchanged, alongside expectations.
  • Forward guidance was maintained, with the BoC still seeing slack as fully absorbed by H2 2022.
  • July's meeting and accompanying Monetary Policy Report now seen as 'live' and an opportunity for the Bank to trim weekly asset purchases to C$2bln from C$3bln.
Inline with the Bank's forward guidance, the BoC kept policy unchanged in June, with the board still seeing the Canadian economy as having "considerable excess capacity", therefore justifying "extraordinary monetary policy support". The decision was infitting with sell-side expectations, and did little to deter markets from expecting the QE programme to be wound down by the end of the year, and for the first post-pandemic rate hike to follow in the second half of 2022.