BoC: No further rate hikes in this cycle – TDS

Analysts at TD Securities are no longer expecting further rate hikes from the Bank of Canada, meaning the overnight rate will top out at 1.75% this cycle.

Key Quotes

“Q4 GDP was the nail in the coffin, as the muted growth figures and sub-trend growth in Q1 imply a wider output gap which will not close before the end of 2020. Furthermore, recent developments suggest that homeowners are still struggling to adapt to higher rates, with existing home sales hitting a new 7-year low in February while household leverage hit a new record high in Q4.”

“Core inflation remains near target at 1.8%, but headline CPI will trend below target for most of 2019. This leaves the labour market as the one bright spot in the domestic economy and while we did lose 7k jobs in March, the six-month average is still elevated at 36k. Furthermore, wages have finally started to pick up off the lows but this alone is not enough to keep the BoC on a tightening path.”