RBC Previews This Week's Bank of Canada Policy Meeting

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RBC Previews This Week's Bank of Canada Policy Meeting

, MT Newswires - 9:43 AM ET 4/14/2025 default

09:43 AM EDT, 04/14/2025 (MT Newswires) -- Wednesday's interest rate decision for the Bank of Canada will be another close call for policymakers, but RBC said it expects the BoC will ultimately opt to add another "insurance" 25 basis point cut in the face of escalating United States tariff risks.

Canada's central bank will publish its policy statement and Monetary Policy Report at 9:45 a.m. ET on Wednesday.

Minutes from the last BoC meeting largely confirmed that the central bank would have foregone a cut to the overnight rate in March if not for heightened trade risks. RBC continues to think that fiscal policy is better positioned to provide the kind of timely, targeted, and temporary support needed for the economy as needed than changes in interest rates.

The bank's tracking of consumer spending has been more resilient than the plunge in consumer confidence measures in March alone would suggest. But, business investment and hiring intentions have weakened considerably with employment plans falling below pandemic-era lows in the BoC's Q1 Business Outlook Survey (BOS).

About 32% of firms surveyed now expected a recession in the next 12 months, up from 15% in the previous quarter. March employment data reinforced these concerns with the job count falling and unemployment rising. Housing markets have shown clear signs of slowing-reducing the odds that near-term interest rate hikes will lead to another round of surging house prices.

Complicating the BoC's decision is that inflation has broadly surprised to the upside in recent months. RBC expects March's headline inflation will hold at 2.6% year-over-year on Tuesday, matching February's rate with lower gasoline prices in March offset by further unwinding of the GST/HST tax holiday that ended mid-February. Much of that increase outside of the drop in fuel costs is expected to show up in after-tax prices for restaurant meals.

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