**As seen in Risk In The Week report 03/02/24, subscribe at cablefxm.co.uk/reports
The Bank of Canada held rates steady at 5.0%, this was in line with economists' expectations. The central bank said that the economy is now looking to be operating in modest excess supply while they expect it to strengthen gradually around the middle of the year. The council stated that it remains concerned about risks to the outlook for inflation as underlying prices remain persistent. Since the January meeting, the labour market has shown another monthly gain at 37.3K while the jobless rate fell to 5.7%. On the inflation front, estimates of 3.3% January CPI were missed at 2.9% Y/y. Last quarter's growth printed at an annualized rate of 1.0%, above the 0.8% forecast.
Similar to the U.S., the desk at Morgan Stanley sees the BoC opting for a "higher for longer" stance as data do not support a rush to move rates lower. Morgan Stanley expects the first 25bps rate cut in July 2024 and a total of 100bps of easing this year. Economists at RBC see the first BoC rate cut delivered by June, their base case scenario factors for softer domestic output while the unemployment rate trends higher and inflation moves towards the target.
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