{"id":57412,"date":"2023-03-08T10:40:59","date_gmt":"2023-03-08T08:40:59","guid":{"rendered":"https:\/\/ironfx-com-php8.wp-dev.int.theitops.net\/?p=57412"},"modified":"2025-10-13T12:54:42","modified_gmt":"2025-10-13T09:54:42","slug":"bank-of-canadas-interest-rate-decision-next-up","status":"publish","type":"post","link":"https:\/\/www.ironfx-id.com\/ms\/bank-of-canadas-interest-rate-decision-next-up\/","title":{"rendered":"Bank of Canada\u2019s interest rate decision next up"},"content":{"rendered":"

The greenback strengthened significantly against its counterparts yesterday, supercharged by Fed Chair Powell\u2019s hawkish remarks which hinted that a hike of a larger magnitude may be preferred in the March meeting. Bank of Canada\u2019s interest rate decision is the main event for the day and CAD traders are expected to tune in, awaiting for the confirmation that the bank would pause its tightening cycle and keep its key policy rate steady at 4.5%. BOC Governor Macklem explicitly stated that the central bank will adopt a wait and see position to observe the cumulative effect of its tightening efforts during last month\u2019s decision. Currently according to the latest CAD OIS data, the market places a 85% probability in the scenario where BOC stays on hold and should that be the case, we may see the Loonie weaken or at the very least remain negatively predisposed against any of its counterparts moves. Evidently, yesterday the Loonie traded near 4-month lows against the dollar and the move highlights the ongoing risk that further devaluation may follow, as other banks press on with further tightening. Fed Chair Powell during his testimony in front of the Senate Banking Committee addressed a barrage of questions spanning from monetary policy to economic theory and politics. The Chair cautioned that interest rates are likely to head higher than what central bank policymakers had expected, given January\u2019s strong employment results alongside the hotter than anticipated PCE data, emphasizing specifically on the core aspect of the results, which was evidently stickier than expectations. Given that the Fed has a dual mandate, ensuring price stability and facilitate favorable employment market conditions, the central bank seeks to restore the former since the later remains resilient. Overall, as the bank acknowledged that it is still far away from its goal and a higher terminal rate is now a reality, the markets rushed reassess their outlooks and a shift in projections took place in the swaps markets. Money markets started to reprice the probabilities that the Fed may pursue a 50 basis points hike rather than the 25 bps that was initially expected in the March meeting. The FFF prior to the release implied a 77% probability for a 25 basis points hike scenario, whereas currently the 50-basis points scenario amasses a 64% probability. Moreover, money markets are pricing in a higher terminal rate also above the 5.25-5.5% range with an overwhelming majority betting that a 5.5-5.75% level will be reached at June\u2019s meeting. Bond yields surged sharply higher yesterday with the 2-year yield hitting year-to-date highs, just shy on 5%. The benchmark 10-year treasury yield has also climbed higher, above the 4% once again, approaching a three-month high. The overall picture drawn from the steepening of the inverted yield curve signals that the markets foresee the probability for a recession in the short-term rise.<\/p>\n\n\n\n

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