The Bank of Canada held rates at 2.25%, as expected but the statement highlighted risks to both sides of the mandate.
- Whether war is net positive (due to oil) or net negative (due to costs), it will shift composition
- Food inflation remains a problem
- Uncertainty is high, we’ve seen an evolution of the risks since January MPR
- We are prepared to respond as needed
- This is an economic shock, how big it is depends on how long it lasts
- We know inflation is going to go up in the near term
- The risk that higher energy prices will quickly spread to other goods and services “looks contained, that doesn’t look too high”
- We will take rate decisions one meeting at a time
I don’t think there’s any question that it’s more negative than positive because it hits global growth so hard and Canada doesn’t have the capacity to absorb inbound funds for energy investment because it can’t build pipelines or LNG facilities on any reasonable timeline.
The market is priced for 33 bps of Bank of Canada rate hikes this year.
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