Canadian Dollar: BoC keeps options open on energy and trade – Deutsche Bank
Deutsche Bank highlights that the Bank of Canada left its policy rate unchanged at 2.25% but stressed flexibility. Governor Macklem indicated that sustained higher energy prices could require consecutive rate hikes, while potential US trade restrictions might instead justify rate cuts.

Deutsche Bank highlights that the Bank of Canada left its policy rate unchanged at 2.25% but stressed flexibility. Governor Macklem indicated that sustained higher energy prices could require consecutive rate hikes, while potential US trade restrictions might instead justify rate cuts. Canadian 10‑year bonds modestly outperformed, with yields edging only slightly higher.

BoC balances energy inflation and trade risks

"We also had the Bank of Canada’s latest decision yesterday."

"They left their policy rate unchanged at 2.25%, as was widely expected, and they kept their options open given the current uncertainty."

"For instance, Governor Macklem suggested that if higher energy prices led to higher inflation, then “there may be a need for consecutive increases in the policy rate”."

"But he also suggested that additional US trade restrictions could mean they “may need to cut the policy rate further to support economic growth.”"

"Against that backdrop, Canadian bonds saw a relative outperformance yesterday, with the country’s 10yr yield (+0.9bps) seeing a modest increase to 3.49%."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

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