Rabobank analysts Molly Schwartz and Christian Lawrence anticipate that the Bank of Canada (BoC) will maintain its overnight policy rate at 2.25% during the June 10 meeting and keep it unchanged through the end of the year [1]. This expectation aligns with the consensus among 25 Bloomberg-surveyed analysts, all of whom foresee no change in the policy rate [1]. The Canadian Overnight Index Swap (OIS) curve is also reflecting market positioning for a no-change decision, though it implies the possibility of one rate hike this year [1].
The analysts highlight that the BoC is facing significant external shocks, including higher oil prices and evolving US trade policy, which are making policymakers hesitant to adjust rates in either direction [1]. The ongoing war in Iran has contributed to inflationary concerns in Canada, but the BoC acknowledges that it cannot influence energy prices through monetary policy [1]. Governor Macklem has stated that the Bank aims to manage the secondary effects of these shocks rather than the direct impact on energy prices [1].
Despite recessionary pressures, Rabobank notes that the economic forces driving the downturn are primarily external, particularly those related to US trade dynamics [1]. The report emphasizes that neither the inflationary pressures nor the economic deterioration are rooted in domestic factors that monetary policy can effectively address [1]. As such, the BoC is expected to remain on the sidelines, refraining from either hiking or cutting rates in the near term [1].
CONCLUSION
The Bank of Canada is widely expected to keep its policy rate unchanged at 2.25% due to external shocks such as higher oil prices and US trade policy uncertainty. With both inflationary and recessionary pressures stemming from outside Canada, analysts see little scope for monetary policy adjustments in the near future.