In a sentence, not a great deal. This was expected to be a ‘holding meeting’ by the BoC and that was pretty much what it was. Rates kept at 0.25% and QE at $3 billion per week. The main headline bullet points reported were:

  • Economic developments have been largely in line with the outlook from April’s monetary policy outlook.
  • Commodity prices have risen further, notably oil, and the CAD has seen a further appreciation.
  • The BoC is committed to keeping the interest rate at the effective lower bound (0.25%)until economic slack is absorbed and 2% inflation is achieved.
    The BoC see interest rate rises in the second half of 2022.
  • Inflation is expected to remain near 3% over the summer but ease later in the year.
  • Strong growth in foreign demand and higher commodity prices should also lead to a solid recovery in exports and business investment.

A couple of things to note

  1. The BoC noted that core inflation had risen less than CPI inflation. Central banks will be keeping a close eye on inflation to ensure it doesn’t run out of control.
  2. Employment was mentioned and low wage workers, youth, and women continue to bear the brunt of job losses. After the April BoC meeting, there were two disappointing job prints in a row. This was due to the rising COVID-19 cases in Canada. However, job openings remain strong, so jobs should pick up from here as Canada is quickly vaccinating its citizens.
  3. This broadly keeps alive the expectations of bond tapering for the BoC in July. The BoC say that ‘decisions regarding adjustments to the pace of net bond purchases will be guided by Governing Council’s ongoing assessment of the strength and durability of the recovery’.

USDCAD pretty flat out of the meeting and USDCAD could be due a retracement from here.