Bank of Canada: holding its fire, but worried

The Bank of Canada opted to stand pat with the policy rate remaining at 2.75%, rather than continue on its prior easing path, but this was clearly a decision based on a lack of information rather than a definitive signal that rate cuts are done. The degree of uncertainty was reflected in a Monetary Policy Report that eschewed a base case forecast, showed two alternative scenarios that differed in tariff scenarios, and emphasized that there are other possible outcomes still in play. That said, both of its illustrative scenarios include a dent to growth, in one case one that the Governor termed to be “severe,” and neither has inflation averaging far from 2% over the forecast horizon. That’s a combination that in our view would have justified another quarter point cut given that rates are still only at the mid-point of the neutral range.

Read more in the detailed report below.