Bank of Canada likely to hold rates as economy stagnates
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- Bank of Canada is expected to hold its policy rate at 2.25% for a fifth straight meeting.
- Headline CPI inflation rose to 2.8% in April from 2.4% in March, while core inflation stayed near the 2% target.
- Claire Fan of the Royal Bank of Canada said core inflation has slowed, noting the economy is sluggish.
- Financial markets are pricing in a 0.25% rate hike later in the year, down from expectations of up to three hikes in March.
- Tiff Macklem warned that sustained high oil prices could require consecutive rate hikes, but also said rates could be cut if the USMCA review stalls and U.S. tariffs rise.
Why it matters: Canadian borrowers benefit from the unchanged 2.25% policy rate, while bond investors face modest upside as markets price only a 0.25% hike later this year.
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