The Bank of Canada’s decision to keep interest rates unchanged at 2.75% today was not a huge surprise given recent above-target gains in core prices, concerns about future price increases and uncertainty about the extent to which the economy requires additional policy support in the face of ever-changing trade policy. Nonetheless, the Bank’s communications were mostly dovish, which lends some support to our view that it will eventually cut interest rates to 2.0% this year, rather than pause at 2.25% as market pricing implies.
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