-- The Bank of Canada held interest rates steady at 2.25% on Wednesday, as was widely expected, said UBS.
As the bank also forecast, the guidance delivered by the BoC was largely unchanged from the March policy meeting: uncertainty is elevated, the impact of shocks on the outlook unknown and Canada's central bank is ready to respond as needed.
Inflation breadth and inflation expectations will be key to watch for potential shifts in the stance of policy, states UBS. With this, the bank thinks the BoC remains on an extended pause and it sees no change in rates from them this year.
Wednesday's updated monetary policy report took on board a higher path for oil prices, the bank noted. This did not boost the expectation for headline consumer price index as much as UBS expected, but it did push up to 2.3% in 2026 versus 2.0% previously.
The expectations for growth were little changed. The BoC also left its estimates for the neutral rate unchanged at the 2.25%-3.25% range, with slower population growth offsetting higher potential growth and the spillovers from an expectation that the United States neutral rate is higher.