Bank of Canada: Rates likely to stay at 4.5% this year, before easing in 2024 — CIBC

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The January meeting of the Bank of Canada was as expected, with a rate hike of 25 basis points. Tiff Macklem of the BOC, stated that the time has come to pause and assess whether the policy is restrictive enough. CIBC analysts expect interest rates to remain at 4.5% for the rest of this year, before gradually easing in 2024.

The BOC remains on the sidelines

“The Bank of Canada raised interest rates once more, but gave a more explicit signal than expected that it was staying out. The 25 basis point hike, which puts the overnight interest rate at 4.5% , had been anticipated by the consensus. Not so the change in orientation, since the Bank explicitly affirms that, if the economy evolves as expected, the rate will remain at its current level”.

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“With the forecasts of the Monetary Policy Report for GDP growth and inflation little changed compared to October and a little stronger than ours, we suspect that the economy will indeed evolve in line with or even a little weaker than suspected by the Bank, and that today’s rise in interest rates will mark the end of this cycle.”

“We expected today’s 25 basis point rise to be the last of this cycle, and the Bank’s change in focus only reaffirms this belief. Although there is still a slight bias towards a further rise in interest rates in its statement , today’s release suggests the Bank will stand on the sidelines for now and wait for a few months of data to accumulate rather than necessarily react to short-term surprises.”

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Source: Fx Street

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