How economists and market bets for rate cuts are reacting to today’s BoC decision

on Wednesday as expected and said it was still too early to consider a cut, given the persistence of underlying inflation.

The following table details how swaps markets are pricing in further moves in the Bank of Canada overnight rate, according to Refinitiv Eikon data as of 1035 am Friday. The current Bank of Canada overnight rate is 5%. While the bank moves in quarter point increments, credit market implied rates fluctuate more fluidly and are constantly changing. Columns to the right are percentage probabilities of future rate moves.

We’ve come a long way in our fight against high inflation. Monetary policy is working—inflation is coming down. But it’s too early to loosen the restrictive policy that has gotten us this farKey Takeaway: There’s been good progress on inflation, but with core CPI still rising at an above-3% pace, the Bank remains concerned about upside risks. BMO continues to look for a June start to cuts, and there’s nothing in today’s statement to change that view.

It wouldn’t be the Bank’s style to hint today about a rate cut as far off as June, so we’ll stick with our call for a rate cut that month despite the lack of fresh dovish talk today.The song remains the same. The BoC came out today to reinforce its view that more time is needed to make sure that inflation is headed to the 2% target. We get it. With core rates of inflation tracking around the mid-3% level, the Bank can justify waiting longer.

While policymakers say it’s still too early to consider lowering rates, Governor Macklem acknowledged that policy is working as expected. The economy remains weak and inflation has eased further since the January rate decision. In the communications released today, officials marked lower their assessments of both core inflation and wage growth, implicitly taking some greater comfort in the evolution of both.

The bank is also likely waiting to see what steps the U.S. Federal Reserve will take. But the need for a rate cut is becoming more evident as the economy struggles to gain momentum.

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