3-NOV-2023

BoC Minutes (Wed):

The BoC left rates unchanged at 5.00%, as was expected, and it maintained guidance that it is prepared to hike rates further if needed, acknowledging that inflationary risks have increased. The MPR saw inflation forecasts lifted, while growth prospects for 2023 and 2024 were revised lower, but 2025 saw a marginal nudge upwards. the BoC now expects inflation to return to target by the end of 2025 (prev. vs it was mid-2025 in its July MPR). It noted that near term inflation expectations are still high and there is a risk they could become a driver of wage-and price-setting behaviour. At his post-meeting press conference, both Governor Macklem and Deputy Governor Rogers pushed back on the idea of rate cuts anytime soon. Both were quizzed on the move higher in bond yields and its impact, Rogers noted it was something it considers among many other factors. Meanwhile, Macklem himself suggested Canada will likely see two or three quarters of small negative growth, but he is not predicting a deep recession with steep contraction and major job cuts. Looking ahead, analysts at RBC do not expect any additional hikes from the BoC, with data showing signs of a softening economy. It looks for the overnight rate to be held at 5% through H1 2024 with modest cuts from Q3 2024.