The Bank of Canada maintained its target for the overnight rate at 1 ¾ percent, as the consensus was expecting. There were no surprises, so the USD/CAD pair did not have more volatility after the fact; the most volatile moment was between one hour before and one hour after the announcement where the pair traded between 1.3180 and 1.3248. At this moment, it is trading at 1.3215 along with a sideways crude WTI price, which barely moved 0.25 percent lower in a typical price consolidation movement and it is waiting for more news to pick a direction.
The BoC mentioned that the rate normalization would happen “over time,” and also that the Canadian economy has been performing well overall, growth has been running close to potential, and unemployment is at a 40-year low. The BoC also pointed out that looking ahead, exports and non-energy investment are projected to grow solidly, supported by foreign demand, the CUSMA, the lower Canadian dollar, and federal tax measures targeted at investment.
However, the BoC did allege risks from oil and housing. They stated that housing investment has been weaker than expected, as housing markets adjust to municipal and provincial measures, changes to mortgage guidelines, and higher interest rates. Furthermore, household spending will be dampened further by the slow growth in the oil-producing provinces. Regarding the oil concern, it seemed misplaced with oil WTI now in a bull market. The next interest rate decisions are on March 6th and April 24th.