The Bank of Canada today held its target for the overnight rate at 5%, as was widely expected. The central bank continues to normalize its balance sheet through quantitative tightening, reducing its Government of Canada bonds holdings.
The Monetary Policy Report (MPR) detailed a slowdown in global economic growth “as past increases in policy rates and the recent surge in global bond yields weigh on demand.” Continued increases in longer-date bond yields reflect the stronger-than-expected growth in the US, where the Q3 economic growth rate, released tomorrow, is expected to be a whopping 5%. Ten-year yields in the US have risen to nearly 5%, boosting fixed mortgage rates in Canada.
Oil prices are higher than was assumed in the July MPR, and the war in Israel and Gaza is a new source of geopolitical uncertainty.