Commerzbank’s Michael Pfister anticipates that the Bank of Canada (BoC) will keep interest rates unchanged, as policymakers monitor the effects of the Middle East conflict and recent softer inflation data [1]. According to Pfister, the latest inflation figures for March were lower than expected, with core inflation stabilizing just above 2% after a prolonged period of volatility [1]. The Canadian real economy is described as recovering very slowly, and Canada’s energy independence is seen as a buffer against potential price shocks [1].
Pfister notes that the BoC is unlikely to raise rates before the last quarter of the year, citing ongoing uncertainties such as the difficult relationship with the US and the upcoming United States-Mexico-Canada Agreement (USMCA) negotiations [1]. He argues that even if a rate hike becomes necessary due to the war, other central banks are likely to act first [1].
Currently, monetary policy is not expected to be the primary driver of the Canadian dollar. Instead, the rise in oil prices is identified as the main factor influencing the CAD in the near term [1]. No immediate market reaction or analyst consensus beyond Commerzbank’s view is provided in the article.
CONCLUSION
Commerzbank expects the Bank of Canada to maintain its current interest rate policy, with oil prices taking precedence as the key driver for the Canadian dollar. The outlook suggests limited monetary policy action until at least the last quarter, barring significant external shocks.