BOCs Gravelle is speaking now. Some comments:
- BOC will likely further lift is near term inflation forecasts
- Our current policy rate 1% is too stimulative
- It is possible bank may have to raise rates above neutral because parts of the economy might be less sensitive to hikes than in the past
- Stronger housing activity could also cause the BOC to lift rates past neutral
- On the other hand the bank may pause hikes as rate enters neutral range, and inflation starts to slow
- We could also see a larger than expected housing slowdown due to higher indebtedness and unsustainably higher housing prices
- Reiterates that the bank is prepared to be as forceful as needed when it comes to quickly normalizing the policy rate
- Main factor in recent C$ weakness despite higher commodity prices is likely strengthen of the US dollar
- Recent increasing commodity prices will likely boost business investment by less than half of what is typically expected, in part because investors expect demand for fossil fuels to moderate
- Slowdown in a growth does not have to mean high unemployment, by calling overall demand weekend reduce demand for labor and degree of labor shortages
- Broadening of the price pressures is a big concern but we are not seeing a repeat of 1970s style stagflation; inflation is much lower, economy is running pretty hot, job market is tight
- Employers could stop looking for new workers but keep the ones they have with little impact on the jobless rate; this is a scenario that delivers a soft landing
The USDCAD is moving to new session highs and above the high from earlier this week at 1.30515.
USDCAD extends to new cycle highs