Rabobank strategists Molly Schwartz and Christian Lawrence expect the Bank of Canada (BoC) to keep its overnight policy rate at 2.25% through year-end, with no change anticipated at the April 29 meeting. They note significant turnover on the Governing Council, evolving household and business sentiment, and an energy-driven inflation surge, but still anticipates a steady policy stance.

Policy rate seen steady despite shocks

"We continue to expect the Bank of Canada to hold the overnight policy rate at 2.25% through year‑end, implying no change at the April 29 meeting, even as notable turnover reshapes the Governing Council with two new deputy governors appointed and an external deputy role now open."

"Inflation had been stabilizing near target until a sharp, energy‑driven surge revived upside risks, while economic growth remains volatile and productivity weak; despite this, we expect the Bank to look through externally driven inflation shocks and keep rates on hold given persistent economic softness."

"Ahead of the conflict, household sentiment showed tentative improvement, with spending plans still muted but less negative as trade tensions eased; however, consumers continued to perceive a soft labor market and elevated job insecurity, particularly in sectors exposed to AI-related disruption."

"Prior to the war, near‑term inflation expectations remained elevated, driven by food prices, while longer‑term expectations edged lower, but post‑war survey results indicate households now expect weaker growth and higher prices, prompting some to delay travel and major purchases."

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