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Bank of Canada (consensus 5%) in Jan-24

• The Bank of Canada's no-change decision aligns with the economic consensus amid a global economic slowdown and domestic stagnation, with growth in Canada expected to remain subdued into early 2024.
• Despite CPI inflation easing, concerns over persistent shelter cost inflation and lack of significant declines in core inflation measures underpin the Bank's decision to maintain the policy rate at 5%.
• The Bank's policy stance is shaped by the need to balance demand and supply, with a close watch on inflation expectations and wage trends, indicating a readiness to adjust the policy rate if inflationary pressures do not subside as anticipated.

Canada CPI Inflation 3.4% y-o-y (consensus 3.4%) in Dec-23

- Canada's annual CPI inflation rate increased to 3.4% in December 2023, aligning with market expectations, but remains moderate relative to recent averages.
- Although core inflation slowed further, the median and trimmed mean measures surprised to the upside by 0.2pp.

Canada CPI Inflation 3.12% y-o-y (consensus 2.9) in Nov-23

- Canada's CPI inflation rate for November 2023 exceeded expectations, remaining at 3.12% compared to the consensus forecast for a slowing to 2.9%.
- The annual inflation rate remains below the one-year average, indicating a disinflationary environment, but core measures are too high and surprisingly resilient.

Canada Policy Interest Rate 5.0% (consensus 5.0%) in Dec-23

• The Bank of Canada's decision to hold the policy rate at 5.0%, in line with economic consensus, considers the global economic slowdown, notably the impending deceleration in the US and softened growth in the Euro area, coupled with lowered oil prices and eased financial conditions.
• Stagnant domestic growth and the impact of higher interest rates on consumption and business investment inform the current rate decision, with the continued monitoring of modest wage growth and shelter price inflation essential for future policy considerations.
• The Bank's ongoing commitment to price stability, as evidenced by the current policy rate hold and quantitative tightening, reflects a focus on core inflation, demand-supply balance, and wage trends, signalling readiness to adjust rates if inflationary risks persist.