Rabobank strategists Molly Schwartz and Christian Lawrence anticipate that the Bank of Canada (BoC) will maintain its overnight policy rate at 2.25% through the end of the year, with no change expected at the upcoming April 29 meeting [1]. This outlook persists despite significant turnover within the BoC's Governing Council, including the appointment of two new deputy governors and an open external deputy role [1].
The strategists highlight that inflation, which had been stabilizing near the BoC's target, has recently experienced a sharp surge driven by energy prices, reviving upside risks to inflation. However, they believe the central bank will look through these externally driven inflation shocks and keep rates unchanged, citing ongoing economic softness, volatile growth, and weak productivity as key factors [1].
Household sentiment had shown tentative improvement before the recent conflict, with spending plans remaining muted but less negative as trade tensions eased. Despite this, consumers continued to perceive a soft labor market and elevated job insecurity, particularly in sectors vulnerable to AI-related disruption [1]. Prior to the war, near-term inflation expectations were elevated due to food prices, while longer-term expectations were declining. Post-war survey results now indicate that households expect weaker growth and higher prices, leading some to delay travel and major purchases [1].
No immediate market reaction or analyst opinions beyond Rabobank's outlook are discussed in the article [1].
CONCLUSION
Rabobank expects the Bank of Canada to maintain its policy rate at 2.25% through year-end, despite inflationary pressures and changes within the Governing Council. The outlook reflects persistent economic softness and evolving household sentiment, with no rate changes anticipated at the upcoming meeting.