POV: Steady Rate with Taper

Consensus: The Bank of Canada will hold policy rate at the lower bound of 0.25bp yet again while continuing a pattern of tapering at meetings with a Monetary Policy Report from C$2B to C$1B/wk, potentially moving to a reinvestment phase.

• Dovish risk: Preferring a slow and steady pace, Bank of Canada Tiff Macklem may push back against current market pricing of rate hikes starting around April 2022. The Bank may also opt to keep their foot on the policy accelerator by not announcing an expected C$1B taper at this time -- something they have chosen to do at each of the last two policy announcements with a MPR.
• Hawkish risk: With inflation accelerating, the Bank may green-light faster rate liftoff than previous guidance: "We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank's July projection, this happens in the second half of 2022."
• Note, this is the first time since pre-pandemic where "journalists are invited to review the rate announcement press release and the MPR (0700ET), under embargo, at the Bank's head office in Ottawa."