BOC preview leaves a choice for additional interest rate hikes after July
2023-06-07
■ Seeing the cumulative effect of interest rate hikes, the policy interest rate was maintained at 4.50% for the third consecutive meeting on June 7th.
■ Will restrictive monetary policies be maintained in the future, and will interest rates be raised after July based on economic indicators such as employment and prices in May
Bank of Canada (BOC) has held its policy interest rate unchanged at 4.50% for the second consecutive meeting since March. In the statement released after the last meeting held on April 12, the growth rate of the consumer price index (CPI) slowed down rapidly to about 3% in the middle of this year, and then slowly declined. It is expected to reach the Bank of China target (2%) by the end of 2024. In terms of the economy, he pointed out that there is still demand exceeding supply, and the labor market continues to tighten. He commented that the quarterly growth rate from January to March seems to be higher than the forecast in January. The estimated economic growth rate for 2023 has been revised upwards to 1.4%, while for 2024 it has been lowered to 1.3%. However, the wording suggesting the possibility of an economic recession has been removed.
The latest data shows that the year-on-year growth rate of the consumer price index (CPI) in April was 4.4%, which is the first acceleration of growth in 10 months. In the context of high-interest rates, the rise of rent and housing loans pushed up. In addition, the year-on-year growth rate of real GDP from January to March was 3.1%, which continued to be driven by personal consumption and exports, higher than the BOC forecast (a year-on-year growth of 2.3%).
At the meeting held on June 7th, BOC is also likely to maintain the policy interest rate at 4.50% for three consecutive meetings to see the cumulative effect of interest rate hikes. However, if the May employment statistics released on the 9th show an unemployment rate of 5.1% and an average hourly wage increase of 5.2% year-on-year, maintaining the same level as last month, the idea of tight supply and demand in the labor market would be very annoying. In addition, if the CPI increase for the same month announced on the 27th remains at a relatively high level, it is expected that BOC will continue to maintain a restrictive monetary policy in the future, leaving the option of additional interest rate hikes. We will also pay attention to the opportunity for the Vice President of BOC to give a speech on July 8th, and whether to decide to increase interest rates after the latest quarterly economic forecast is released on July 12th, paving the way for policy. The view that the 25bps additional interest rate hike in the short-term financial market meeting will weave into a strong 58% trend, and the final target point for policy interest rates is to increase to 4.75% -5.00% by the end of the year is the trend.
■ Will restrictive monetary policies be maintained in the future, and will interest rates be raised after July based on economic indicators such as employment and prices in May
Bank of Canada (BOC) has held its policy interest rate unchanged at 4.50% for the second consecutive meeting since March. In the statement released after the last meeting held on April 12, the growth rate of the consumer price index (CPI) slowed down rapidly to about 3% in the middle of this year, and then slowly declined. It is expected to reach the Bank of China target (2%) by the end of 2024. In terms of the economy, he pointed out that there is still demand exceeding supply, and the labor market continues to tighten. He commented that the quarterly growth rate from January to March seems to be higher than the forecast in January. The estimated economic growth rate for 2023 has been revised upwards to 1.4%, while for 2024 it has been lowered to 1.3%. However, the wording suggesting the possibility of an economic recession has been removed.
The latest data shows that the year-on-year growth rate of the consumer price index (CPI) in April was 4.4%, which is the first acceleration of growth in 10 months. In the context of high-interest rates, the rise of rent and housing loans pushed up. In addition, the year-on-year growth rate of real GDP from January to March was 3.1%, which continued to be driven by personal consumption and exports, higher than the BOC forecast (a year-on-year growth of 2.3%).
At the meeting held on June 7th, BOC is also likely to maintain the policy interest rate at 4.50% for three consecutive meetings to see the cumulative effect of interest rate hikes. However, if the May employment statistics released on the 9th show an unemployment rate of 5.1% and an average hourly wage increase of 5.2% year-on-year, maintaining the same level as last month, the idea of tight supply and demand in the labor market would be very annoying. In addition, if the CPI increase for the same month announced on the 27th remains at a relatively high level, it is expected that BOC will continue to maintain a restrictive monetary policy in the future, leaving the option of additional interest rate hikes. We will also pay attention to the opportunity for the Vice President of BOC to give a speech on July 8th, and whether to decide to increase interest rates after the latest quarterly economic forecast is released on July 12th, paving the way for policy. The view that the 25bps additional interest rate hike in the short-term financial market meeting will weave into a strong 58% trend, and the final target point for policy interest rates is to increase to 4.75% -5.00% by the end of the year is the trend.