USD/CAD flows: BoC delivers a cautious hike, CAD unmoved
BoC sticks to its hawkish build up and deliver a hike
Forward guidance cautious and measured though, meeting by meeting assessment
BoC delivers the market-expected hike, holding true to some of the recent hawkish commentary in the build-up. Risks from higher energy building price pressures versus argument that inflation has been concentrated on direct and indirect energy impacts was the debate - with the balance going in favour of reducing accommodation, especially with growth projected to remain solid after the negative Q4 tariff impact, going into 2027-8.
Perhaps most importantly, forward guidance is characterised as meeting by meeting, with need for further tightening possible and measured rather than assumed and immediate: “[BoC] will take future decisions one meeting at a time. There could be a need to raise the policy rate further, but given the uncertainties, we will proceed carefully”.
USD/CAD little changed on the day and focus switching to the Fed.