MNI BRIEF: BOC Says Mkts Have Been In Line With Rate Guidance

Bank of Canada Deputy Governor Toni Gravelle said Thursday the idea of divergence between investors predicting interest-rate cuts and officials signaling potential further tightening may be overstated.

“The biggest concern when there’s divergence between the market and ourselves is actually the next decision, the very next decision, and currently, markets have been relatively right on our previous two or three decisions," he said in response to a question from MNI following a speech in Windsor, Ontario. "So it seems like they are taking in the data in the same way we are."

The Bank held its key rate at 5% for a third meeting Wednesday as economists predicted and officials said they could hike again if inflation remains sticky, while some investors see a rate cut early next year. Through the pandemic central bankers touted "forward guidance" as another tool that nudged market yields in a helpful direction to keep the economy on track.

“There will always be a certain divergence in terms where they price in our future decisions,” Gravelle said. “I don’t think I would put a lot of weight in the degree of divergence.” (See: MNI INTERVIEW: BOC To Delay Rate Cuts And Move Slow- Alexander)