The Bank of Canada (BoC) announced on Wednesday that it left the benchmark interest rate unchanged at 4.5% following the April policy meeting. This decision came in line with the market expectation. BoC Governor Tiff Macklem will be delivering his comments on the policy outlook and respond to questions at a press conference starting at 1500 GMT.

In its policy statement, the BOC said that the Governing Council will continue to assess whether monetary policy is sufficiently restrictive and added that they remain prepared to raise rates if needed.

Market reaction

With the initial reaction, USD/CAD edged lower and was last seen losing 0.1% on the day at 1.3450.

Key takeaways from the policy statement

"Getting inflation down to 2% could be hard because inflation expectations are coming down slowly, service price inflation and wage growth remain elevated."

"In Canada, demand is still exceeding supply and labor market remains tight; wage growth still elevated relative to productivity growth."

"Inflation in many countries is easing in face of lower energy prices, normalising supply chains and tighter monetary policy."

"BoC expects inflation to fall quickly to around 3% in mid-2023 and then decline more gradually to 2% target by end-2024."

"Will continue the policy of quantitative tightening."

"As more households renew mortgages at higher rates and restrictive monetary policy starts to work it way through economy, 2023 consumption is expected to moderate."