Bank of Canada Holds Rates Steady & Sticks to Data Dependency, USD/CAD Slides

This morning, the Bank of Canada held its April monetary policy meeting and decided to maintain the overnight interest rate at 4.50% for the second time consecutively. This decision was consistent with market predictions, resulting in a slight decrease of approximately 0.08% in USD/CAD after the announcement.
The statement reiterated previous guidance and acknowledged the bank’s readiness to increase borrowing costs in order to stabilize prices. This suggests that the tightening cycle may not be concluded despite the current decision to maintain rates.
Regarding the economy, policymakers have recognized that the labor market presently remains constricted, while growth is performing more favorably than expected. Inflationary pressures are also diminishing, albeit policymakers acknowledged that achieving the target of 2.0% inflation may prove challenging due to underlying price dynamics.
The central bank has revised its GDP estimate for 2023, raising it from 1.0% to 1.4%. However, the inflation outlook shows little change, suggesting that consumer prices are following recent assumptions. The updated projections are summarized in the table below.