Bank of Canada left 5% overnight rate unchanged, RBC expect it’ll stay there through 2023

The decision was expected by markets:

From RBC’s response, analysts at the bank note that while headline CPI has slowed, the BoC’s preferred core measure remains persistently above the 2% target. Inflation is likely to gain in the near term:

• Wage growth is still high
• oil prices higher in recent weeks

RBS note that rates are now at a level the BoC sees as restrictive,

• enough to put downward pressure on economic growth and inflation pressures over time

And indeed that the impacts of hikes already are still building.

RBC conclude that the BoC is still

• highly data-dependent and won’t hesitate to push interest rates higher if necessary to return inflation to the 2% target rate

But forecast

• the recent soft-patch in economic data will continue, and look for the overnight rate to hold where it is through the end of this year