The Bank of Canada (BoC) announce that it hiked its benchmark interest rate by 50 basis points to 4.25% following the December policy meeting. This decision came in line with the market expectation. In its policy statement, the BoC said that it will be considering whether the policy rate needs to rise further.
Market reaction
With the initial reaction, USD/CAD edged lower and was last seen losing 0.3% on the day at 1.3610.
Key takeaways from policy statement
"There is growing evidence that tighter monetary policy is restraining domestic demand."
"Three-month rates of change in core inflation have come down in an early indicator that price pressures may be losing momentum."
"Inflation is still too high and short-term inflation expectations remain elevated."
"Data since October monetary policy report support the bank's outlook that growth will essentially stall through the middle of 2023."
"Inflation around the world remains high and broadly based."
"Global economic growth is slowing, although it is proving more resilient than predicted in October Monetary Policy Report."
"Gradual easing of global supply bottlenecks continues, although further progress could be disrupted by geopolitical events."
"Q3 Canada GDP was stronger than expected, the economy continues to operate in excess demand; labor market remains tight."
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