If I was at the Bank of Canada here is what the statement on Wednesday would say:
We’re cutting rates by 25 basis points today and what we do next will depend on tariffs between now and our next decision on March 12 decision.
There is nothing more to say than that. The overnight rate is at 3.25% right now and the market is pricing in a 99% chance of a cut on Wednesday. For the March meeting, pricing is at 44% for another cut to 2.75%. For year-end there are 67 bps priced in.
All that is highly subject to change. The market doesn’t think 25% tariffs on Canada and Mexico are coming and I agree but very few people have a high degree of confidence on that and it’s certainly not the Bank of Canada’s role to make political bets.
So we wait and see.
This article was written by Adam Button at www.forexlive.com. Source