No Longer Talk Of Pausing At Neutral

Dep Gov Beaudry with a further hawkish skew sees:

• USDCAD slide lower at 1.2591 (-0.5%) with a low of 1.2583, moving close to testing support at 1.2562 (61.8% retracement of the Apr 5 – May 12 bull run) having moved through initial support at yesterday’s post-BoC low of 1.2609.
• 2Y GoC yields rise a further 1.5bps for +11.5bps since just prior to yesterday’s BoC statement.

• He notes that at the Apr 13 decision the Bank had indicated that once back to neutral, defined as 2-3%, it would consider whether to pause before raising rates further, or likely go somewhat about neutral if inflation pressures were more persistent – that’s guidance reiterated by Gravelle from three weeks ago prior to the latest CPI beat.
• Now though, there is no mention of a pause. “In the deliberations for yesterday’s decision, we noted that price pressures are broadening and inflation is much higher than we expected and likely to go higher still before easing. This raises the likelihood that we may need to raise the policy rate to the top end or above the neutral range to bring demand and supply into balance and keep inflation expectations well anchored.”