Market News

The Bank of Canada is expected to hold its policy rate steady at 2.25 per cent when it releases its latest interest rate decision at 9:45 a.m. ET today. The central bank faces a daunting set of economic risks due to the war in Iran and ongoing uncertainty around the Canada–U.S.–Mexico Agreement. Economists polled by Reuters were unanimous in their expectations for a hold today.

The conflict in Iran has shifted global concerns “from trade pot to oil frying pan,” BMO economist Sal Guatieri said in a Monday note to clients, putting upward pressure on inflation and bond yields, and weakening global demand, confidence and markets. These factors “will undercut economic growth, while handcuffing central bankers from providing support,” leaving them in a wait-and-see mode, Guatieri notes — a situation facing central banks around the globe.

“We suspect policymakers will look past the oil-driven rise in prices and remain wary of economic risks until the fog from both the Iran war and the trade war lifts, keeping overnight rates at modestly supportive levels,” Guatieri writes.

BMO sees the Bank of Canada (BoC) keeping its overnight rate unchanged this year and next. Market expectations of a hike grow stronger through the end of the year, according to LSEG data, with odds of a December hike currently at 73.6 per cent.

The Bank has held its policy rate steady at its last two consecutive meetings.