Andrew Pyle
January 24, 2024
Bank of Canada done... again
No one expected the Bank of Canada to do anything with rates today and that’s what we got. The official overnight target stays at 5% and this is the fourth meeting in a row where the Bank has taken a stand-pat decision. As anticipated, the accompanying statement acknowledged recent indications of weakness in the economy and officials now state that we are operating in a modest excessive supply mode. The slowdown in growth is expected to persist through the first half of the year, but they predict things will pick up in the second half of the year.
Implicit in the reference to excess supply is the suggestion that rates will eventually be able to decline over the course of the year, as inflation continues to move down from its current perch of around 3% towards a forecast of 2% in 2025. That being said, the Bank is not changing its view on it “still concerned about risks to the outlook for inflation”, with the notable change in the sentence from the one in December being the replacement of “remains prepared to raise the policy rate further if needed” with “particularly the persistence in underlying inflation.”
You will recall that this time last year, the Bank raised rates a quarter-point at its January meeting and then paused in March and April. Market participants had thought that the Bank was done, but then we got the surprise rate hike in June – following worse than expected inflation data for April. I don’t believe we are in the same situation, but with continued tensions in the middle east and potential inflationary spillover, nothing is off the table. At a minimum, investors should be cautious about how much easing they should be pricing in for this year – especially in the first half. We will be discussing this and other developments in tonight’s conference call.
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On behalf of the Pyle Wealth Advisory team, have a wonderful rest of the week.
Andrew Pyle
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Andrew Pyle is an Investment Advisor with CIBC Wood Gundy in Peterborough. The views of Andrew Pyle do not necessarily reflect those of CIBC World Markets Inc.
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