Jan. 28 at 6:02 PM
PickAlpha Midday -
Bank of Canada kept its policy rate at 2.25% for a second straight meeting, stressing it’s unclear how long the pause lasts and whether the next move is a cut or a hike. Macklem framed the backdrop as Canada adjusting to US protectionism, with elevated uncertainty (and USMCA review risk) making the reaction function unusually wide.
Tickers:
$FXC,
$EWC,
$DXY
Our view is the BoC is trying to buy time, not declare victory - inflation is near target, but growth/labor risks are increasingly trade-policy-driven, so they want optionality. The investable takeaway is policy asymmetry: the base case is hold, but the next meaningful move likely comes only if the labor market cracks harder (cuts) or if trade-driven costs re-ignite core inflation (hikes). If volatility around US tariffs/USMCA escalates and hiring plans roll over, cuts get pulled forward.
