USD/CAD Surges Toward 1.38 As BOC Remains Neutral

Bank of Canada Releases Meeting Statement on March 8, 2023

• Bank of Canada rates at 4.50% as expected
• Prior interest rates were 4.50%
• This is the first meeting where the Bank of Canada held rates unchanged in 12 months
• The line that previously said ” the economy remains in excess demand” is absent
• Global economic developments have evolved broadly in line with the outlook in the January Monetary Policy Report
• In the United States and Europe, near-term outlooks for growth and inflation are both somewhat higher than expected in January.
• In Canada, economic growth came in flat in the fourth quarter of 2022, lower than the Bank projected. With consumption, government spending and net exports all increasing, the weaker-than-expected GDP was largely because of a sizeable slowdown in inventory investment
• Employment growth has been surprisingly strong
• With weak economic growth for the next couple of quarters, pressures in product and labour markets are expected to ease
• the latest data remains in line with the Bank’s expectation that CPI inflation will come down to around 3% in the middle of this year.

The focus on the statement was on whether the Bank of Canada would retain guidance that at the previous meeting said: “If economic developments evolve broadly in line with the MPR outlook, Governing Council expects to hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases.”

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