Morning Market Brief: April 11, 2024

Morning Market Brief: April 11, 2024

Inching towards a rate cut?

The Bank of Canada (BoC) held steady at its April meeting. While inflation is coming down, it remains stubbornly high, suggesting the central bank’s battle against inflation isn’t quite over. The BoC didn’t provide any specific details on the timing of a potential rate cut.?

  • The BoC held its benchmark overnight interest rate steady at 5.00% at its April meeting. The rate hold was widely expected by market participants. The BoC acknowledged its battle against inflation is ongoing, which warranted its restrictive interest rate.
  • The BoC refused to give any timeline on potential interest-rate cuts. While noting inflation has softened, Canada’s central bank said it needs more evidence inflation will slow further to its 2% target. The BoC believes it isn’t appropriate to adjust policy yet given uncertain economic conditions and rising commodity costs, particularly for energy products.
  • The BoC believes inflation will stay close to the 3% mark over the first half of 2024. Inflation is expected to reach the central bank’s 2% target in 2025. Gross domestic product growth is projected at 1.5% in 2024 and 2.2% in 2025, amid relatively resilient global economic conditions.
  • The BoC will also be mindful of the actions of the US Federal Reserve Board (Fed). The US inflation rate was 3.5% year-over-year in March, above economists’ expectations. In response, markets are expecting the Fed to delay rate cuts until later in 2024.

Borrowing costs are set to stay higher for a bit longer. The BoC is grappling with several economic contradictions that are weighing on its decision. Economic growth and inflation are slowing, but wage growth is high, and the housing market is again picking up steam. Tough decisions still lie ahead for the BoC but the potential for a rate hike this year is high.

At?CIBC Private Wealth, we aim to take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss this market and economic update in more detail, please get in touch with your advisor any time.

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