As anticipation builds for the Bank of Canada’s first policy announcement of 2024 on January 24, economists and researchers from seven major banks share their expectations on the Interest Rate Decision and Monetary Policy Report.
The prevailing consensus among analysts suggests that the Bank of Canada (BoC) will maintain the overnight rate at 5.00%. The closely watched press conference following the announcement is expected to provide insights into the central bank‘s stance.
ING: A Tepid Outlook Amidst Inflation and Business Concerns
ING’s forecast leans towards the status quo, citing Canadian core inflation figures and a reluctance for a dovish shift. However, business conditions have softened, reflecting concerns from firms impacted by high interest rates. ING predicts potential rate cuts from the second quarter onwards.
TDS: Holding Steady with a Hawkish Lean
TD Securities expects the BoC to hold the overnight rate at 5.00%, emphasizing a script adherence. Momentum in core inflation and wage growth reduces the scope for a shift in the bank’s messaging. The statement is anticipated to lean hawkish, supporting the Canadian Dollar against more dovish G10 peers.
RBC Economics: Steady Course with Caution on Rate Cuts
RBC Economics anticipates the BoC to maintain the overnight rate at 5%, dispelling notions of an imminent shift to rate cuts. While acknowledging potential changes in quantitative tightening policy, the primary objective would be to ensure liquidity rather than signaling an easing monetary policy. Rate decreases are expected in the middle of the year, followed by more cuts in 2024.
NBF: Unchanged Rate with Emphasis on Hiking Bias
National Bank Financial expects the BoC to leave the policy rate at 5%, with a focus on guidance from the Governing Council. Despite recent core inflation acceleration, a watering down of the hiking bias is not anticipated. The statement may likely reaffirm the readiness to raise rates further if needed.
CIBC: Emphasis on Inflation Progress
CIBC highlights Canada’s weak growth and insufficient progress in core inflation as the key considerations. The bank expects the BoC to underline the need for further inflation progress before contemplating rate cuts, emphasizing flexibility and acknowledging the outsized role of shelter costs.
BMO: Maintaining Status Quo with Patience on Rate Cuts
BMO predicts no change in the overnight rate for the fourth consecutive meeting. While there are discussions about potential quantitative tightening changes, no significant shifts are expected. Rate cuts in 2024 are likely, but the BoC is expected to remain patient, closely monitoring inflation and inflation expectations.
Wells Fargo: Steady Policy with a Hawkish Tone
Wells Fargo foresees the BoC holding the policy rate at 5.00%. The accompanying statement may exhibit a hawkish tone, emphasizing concerns about inflation risks and the willingness to raise rates further if necessary. Focus areas include wage growth and services inflation, with economic projections providing potential hawkish signals.
As the financial community awaits the BoC’s decision, the diverse perspectives reflect the intricate balance the central bank must strike amidst evolving economic conditions.
