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CIBC Private Wealth

December 06, 2023

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Rates hold steady as the BoC focuses on quantitative tightening

 

The Bank of Canada (BoC) held the overnight rate at 5% today as it continues its policy of quantitative tightening. 

 

The global economy continues to slow and it’s helping reduce inflationary pressures in goods and services. Although inflation continues to ease, with CPI inflation at a rate of 3.1% in October, it remains above the target rate of 2%. Although rates held steady today, the BoC remains firm that future hikes could be in the cards if need be.

 

CIBC Capital Markets says the BoC’s decision today to leave rates unchanged was an easy one as it counts some recent small victories against elevated inflation. The drop in CPI inflation and the broadening of the cooling trend in inflation as a whole are both positives for the Canadian economy.

 

The Canadian labour market continues to ease from its extremely tight levels. Job vacancies continue to decline and the unemployment rate has modestly increased—suggesting the economy is no longer in excess demand. Household consumption continues to weaken and business investment is subdued.

 

Adam Ditkofsky, Senior Portfolio Manager, Global Fixed Income at CIBC Asset Management confirms this morning’s rate decision and accompanying comments by the BoC were pretty much in line with market expectations and as a result, caused limited excess volatility in the market. “The BoC cited growing evidence that past increases are dampening economic activity and relieving price pressures” says Mr. Ditkofsky. “This month’s statement was seen as being more dovish than the BoC’s statement in October as it eliminated comments that noted inflationary risks increased and added comments that the economy is no longer in excess demand. Derivative markets are currently pricing in two 0.25% (25 basis points) rate cuts during the first half of 2024, which we view as being premature given inflation remains above target.”

 

At CIBC Private Wealth, we take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss this market and economic update in more detail or have questions about your investments, please get in touch with me any time.

 

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CIBC Private Wealth” consists of services provided by CIBC and certain of its subsidiaries through CIBC Private Banking; CIBC Private Investment Counsel, a division of CIBC Asset Management Inc. (“CAM”); CIBC Trust Corporation; and CIBC Wood Gundy, a division of CIBC World Markets Inc. (“WMI”). CIBC Private Banking provides solutions from CIBC Investor Services Inc. (“ISI”), CAM and credit products. CIBC Private Wealth services are available to qualified individuals. Insurance services are only available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are only available through CIBC Wood Gundy Financial Services (Quebec) Inc.


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