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The Bank of Canada is widely expected to keep the policy rate unchanged at 2.25% tomorrow. The central bank will likely maintain a cautious stance and a “wait and see” approach amid sluggish economy and inflationary risks stemming from US-Iran war. The BoC will also release new economic forecasts which are expected to mirror the other central banks’ outlooks, with upward revision for inflation and downward revision for growth.Recent data has been strongly supporting a neutral stance. Headline inflation climbed to 2.4% in March, largely driven by a spike in energy costs due to the disruptions in the Strait of Hormuz, but the main core inflation metric (Trimmed-Mean CPI) fell to 2.2%, very close to the 2% mid-range target.The recent employment reports have been weak, pointing more towards rate cuts than rate hikes. While a weak labor market and sluggish growth would normally argue for further rate cuts to stimulate activity, the risk of a secondary inflation wave has been keeping the BoC on the sidelines. Central banks typically look through volatile energy prices, but the concern for the BoC will be whether these costs seep into broader inflation expectations and higher wage growth. The risks for the Canadian economy do not stop with the US-Iran war though as there’s still uncertainty around the upcoming CUSMA renegotiations.All in all, tomorrow’s decision is unlikely to bring much volatility as the central bank will likely stress data-dependency and avoid pre-committing to any rate path. The market is pricing in a rate hike in the fourth quarter of 2026, so traders will focus on any change in tone and communication that could point to an earlier than expected rate hike or a strong pushback against market’s pricing.
This article was written by Giuseppe Dellamotta at investinglive.com.
💡 DMK Insight
The Bank of Canada’s decision to hold rates at 2.25% signals a cautious approach amid economic uncertainty. For traders, this means the Canadian dollar could remain under pressure, especially if inflationary concerns escalate due to geopolitical tensions like the US-Iran war. If the BoC’s forecasts indicate a prolonged economic slowdown, we might see further weakness in CAD, which could impact related assets like ADA, currently at $0.25. Keep an eye on how this plays out in the forex market, as CAD pairs may react sharply to any shifts in sentiment. Watch for key support levels in ADA; if it breaks below $0.24, it could trigger further selling pressure. Conversely, if CAD weakens significantly, ADA might find some support as traders look for alternatives in the crypto space. In short, monitor the BoC’s economic forecasts closely; they could provide critical insights into future rate decisions and market sentiment.
📮 Takeaway
Watch ADA closely; if it drops below $0.24, it could signal further downside, especially if CAD weakens due to BoC’s forecasts.
