Rabobank expects the Bank of Canada to keep the overnight policy rate at 2.25% through year-end. No change is expected at the April 29 meeting.<\/p>\n
The Governing Council has had turnover, with two new deputy governors appointed. The external deputy governor role is open.<\/p>\n
Inflation had been stabilising near target before an energy-driven surge increased upward risks. Economic growth is volatile and productivity is weak, yet policy is expected to stay on hold.<\/p>\n
Before the conflict, household sentiment improved slightly, with spending plans still muted but less negative as trade tensions eased. People still reported a soft labour market and job insecurity, especially in sectors exposed to AI-related disruption.<\/p>\n
Before the war, near-term inflation expectations stayed elevated due to food prices, while longer-term expectations edged lower. After the war, surveys showed expectations of weaker growth and higher prices, leading some to delay travel and major purchases.<\/p>\n
The article was produced using an AI tool and reviewed by an editor.<\/p>\n
We expect the Bank of Canada to keep its policy rate at 2.25% at its meeting this Wednesday, April 29. The Bank will likely look past the recent surge in inflation, viewing it as temporary and driven by external energy shocks from last year. The underlying economy remains too soft to justify a rate hike at this time.<\/p>\n
Statistics Canada’s report last week showed March inflation hitting 3.1%, mostly from a 15% year-over-year jump in energy prices tied to the supply disruptions of 2025. However, this is countered by the latest GDP figures, which revealed the economy grew by a mere 0.1% in February. This supports our view that the Bank will prioritize growth over fighting this specific type of inflation.<\/p>\n
The weakness is also clear in the job market, which added only 5,000 roles in March, reflecting the consumer worries about job security we saw after the war in 2025. We’re seeing particular softness in sectors exposed to AI disruption, which is weighing on sentiment. The Conference Board’s consumer confidence index also recently slipped back to 85.2, showing households are not ready for higher borrowing costs.<\/p>\n
For derivative traders, this outlook suggests a strategy betting on stable interest rates in the coming weeks. Options that profit from low volatility in the Canadian bond market could be favorable. We see little reason to position for a surprise rate hike, making bets against such a move attractive.<\/p>\n
This stable rate policy is likely to keep the Canadian dollar under pressure, especially against the US dollar. With the Federal Reserve signaling a more hawkish stance, the interest rate difference between the two countries could widen. Traders could use options to position for a weaker loonie, anticipating a rise in the USD\/CAD exchange rate.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Rabobank expects Bank of Canada to hold 2.25% overnight rate through year-end; April meeting unchanged despite inflation risks.<\/p>\n","protected":false},"author":103,"featured_media":17021,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-48809","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t