• Yash Chauhan, Analyst, Global Capital Markets at Validus Risk Management


• 08.12.2021 05:15 pm
#riskmanagement #infilation #banking

Commenting on the Bank of Canada keeping policy unchanged despite dropping the reference to ‘temporary’ inflation, Yash Chauhan - Analyst, Global Capital Markets, at Validus Risk Management, said: “Given the stellar jobs report, there was some expectation that the Bank would be more aggressive in terms of language to prepare the market for a January hike. Yet, the BoC maintained that the ‘the economy continues to require considerable monetary policy support’ which led to an immediate repricing of market implied probabilities of a January hike.

“It seems like the Bank of Canada is going to be in wait-and-watch mode for longer as its latest rate statement highlighted the uncertainties around the new variant and possible worsening of supply chain disruptions due to recent floods in British Columbia. In line with the Fed, the reference to inflation forces being ‘temporary’ was dropped, however, there was no indication of a more hawkish stance than in the November statement.

“We did not expect any significant changes in the ‘statement-only’ decision but did have a hawkish-bias given that inflation is running hot and the unemployment rate is just a few ticks below pre-pandemic levels.

“The market will be keenly watching for any hawkish guidance by Deputy Governor Gravelle tomorrow.”