“We've been very clear that we are announcing a significant shift in policy and to expect a rising rate path and the time for emergency policy is gone.
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“Everybody should expect interest rates to be on a rising path.” The BoC describes conditions as having tightened by referencing the rise in nominal bond yields but did not acknowledge that the more relevant real borrowing rates have plunged.ġ. First, the policy rate was unchanged at 0.25%.Ģ. Second, forward rate guidance was hawkish toward future steps and the pace of adjustments especially during the press conference during which Macklem said the following:
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With inflation ripping and housing demand soaring the BoC actually eased financial conditions today and into the Spring mortgage pipeline. Please see the accompanying statement comparison, the Monetary Policy Report ( here) and Governor Macklem’s opening remarks to his press conference ( here).Īs a consequence to today’s rate hold and because a hike was mostly priced, financial conditions eased through lowering market-driven borrowing costs and a mild depreciation in the C$ that pared half of its post-statement weakening as the press conference unfolded. It also remains apparent that the central bank has retained an ongoing run-hot bias toward inflation and house prices as it is far behind the appropriate stance of monetary policy for this point in the cycle. That nevertheless remains to be seen not only given the course of developments to come, but also significantly because of the apparent unreliability of BoC forward rate guidance. If the BoC nevertheless follows through and translates the material shift in policy guidance that they provided today into concrete action, then our more hawkish than consensus forecast may yet win the battle as consensus might have misjudged the path from here. The Bank of Canada passed on a rate hike today against our expectations that we had pegged at better than even odds and with congratulations to the shops that got the battle right even if not the reasons.
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BoC will fall further behind inflation and amplify housing imbalances.The BoC’s forward rate guidance tool is unreliable.We lost today’s battle, but BoC guidance suggests were on the right side of the war.The BoC held its policy rate unchanged while guiding future tightening.