The BoC stood pat today:
The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%.
The war in the Middle East has increased volatility in global energy prices and financial markets, and heightened the risks to the global economy. The breadth and duration of the conflict, and hence its economic impacts, are highly uncertain.
Prior to the war, the global economy was on pace to grow at around 3%, as expected in the January Monetary Policy Report (MPR). Economic growth in the United States has moderated but remains solid, driven by consumption and strong AI-related investment. US inflation remains above target and has evolved largely as expected. In the euro area, domestic demand is supporting growth while exports have contracted. China’s economy continues to be boosted by strength in exports, but domestic demand remains weak.
Since the outbreak of the conflict in the Middle East, global oil and natural gas prices have risen sharply, and this will boost global inflation in the near-term. In addition to energy supply disruptions, transportation bottlenecks stemming from the effective closure of the Strait of Hormuz could impact the supply of other commodities, such as fertilizer. Financial conditions have tightened from accommodative levels. Global bond yields have risen, equity market prices have declined, and credit spreads have widened. The Canada-US dollar exchange rate has remained relatively stable.
After expanding by 2.4% in the third quarter of last year, GDP in Canada contracted 0.6% in the fourth quarter. This was weaker than expected at the time of the January MPR, but mainly because of a larger-than-expected drawdown in inventories. Domestic demand grew by more than 2% due to strength in consumer and government spending, even as housing markets remained weak.
We continue to expect the Canadian economy to grow modestly as it adjusts to US tariffs and trade policy uncertainty, but recent data suggest that near-term economic growth will be weaker than anticipated in January. The labour market remains soft. Employment gains in the fourth quarter of 2025 were largely reversed in the first two months of 2026, and the unemployment rate rose to 6.7% in February. Looking through the volatility, recent data also suggest ongoing weakness in exports. It’s too early to assess the impact of the conflict in the Middle East on growth in Canada.
CPI inflation eased further to 1.8% in February, down from 2.3% in January. CPI inflation excluding changes in indirect taxes as well as core inflation measures have also come down and are all close to 2%. Food inflation slowed in February but remains elevated. The sharp increase in global energy prices has led to increases in gasoline prices, and this will push up total inflation in the coming months.
Against this overall backdrop, Governing Council decided to maintain the policy rate at 2.25%. With recent data pointing to weaker economic activity and uncertainty elevated, risks to growth look tilted to the downside. At the same time, inflation risks have gone up due to higher energy prices. We will continue to assess the impact of US tariffs and trade policy uncertainty, and how the Canadian economy is adjusting. We are also monitoring the unfolding conflict in the Middle East closely and assessing its impact on growth and inflation. As the outlook evolves, we stand ready to respond as needed. The Bank is committed to ensuring that Canadians continue to have confidence in price stability through this period of global upheaval.
US Producer Prices jumped a bit:
The Labor Department reported Wednesday that its producer price index – which measures inflation before it hits consumers – rose 0.7 per cent from January, and 3.4 per cent from February, 2025. The year-over-year increase was the most since February, 2025.
And the FOMC stood pat:
Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has been little changed in recent months. Inflation remains somewhat elevated.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The implications of developments in the Middle East for the U.S. economy are uncertain. The Committee is attentive to the risks to both sides of its dual mandate.
In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 3‑1/2 to 3‑3/4 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lisa D. Cook; Beth M. Hammack; Philip N. Jefferson; Neel Kashkari; Lorie K. Logan; Anna Paulson; and Christopher J. Waller. Voting against this action was Stephen I. Miran, who preferred to lower the target range for the federal funds rate by 1/4 percentage point at this meeting.
And Powell stated he was going to wait out the investigation:
Mr. Powell also said that even if his successor won confirmation, he would not leave the board entirely until the Trump administration concluded a criminal investigation into his handling of renovations at the Fed’s headquarters. Mr. Powell has previously denounced that inquiry as politically motivated.
Technically, Mr. Powell’s term as chair ends on May 15, but he can continue to serve until a new leader is formally in place. He can also stay on as a governor until 2028. That outcome is likely to infuriate Mr. Trump, who has frequently lobbed personal attacks at Mr. Powell for not lowering interest rates more aggressively.
…
Citing precedent under federal law, Mr. Powell said he would continue to serve as chair until lawmakers could approve a successor. That process has only barely begun. Mr. Trump announced in January that he had picked Kevin M. Warsh, a former Fed governor, to take the reins as chair, but his nomination has faced significant roadblocks.
…
The Senate has not yet scheduled a hearing to consider Mr. Warsh, raising the odds that he will not be installed before Mr. Powell’s term is complete.The delay stems from a continuing investigation by the Justice Department into the central bank over renovations of its headquarters. Mr. Powell has previously described that inquiry as a pretext to get him to cut interest rates. Lawmakers from both parties have said they would block Mr. Warsh until the matter is put to rest.
A federal court has also concluded that the investigation is pretextual.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.5685 % | 2,480.7 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.5685 % | 4,703.8 |
| Floater | 5.81 % | 6.00 % | 52,245 | 13.97 | 3 | -0.5685 % | 2,710.8 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2830 % | 3,680.9 |
| SplitShare | 4.74 % | 3.47 % | 79,248 | 0.93 | 5 | 0.2830 % | 4,395.7 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2830 % | 3,429.7 |
| Perpetual-Premium | 5.70 % | 5.76 % | 72,865 | 14.05 | 7 | 0.0796 % | 3,070.7 |
| Perpetual-Discount | 5.62 % | 5.71 % | 45,238 | 14.27 | 28 | 0.2171 % | 3,366.8 |
| FixedReset Disc | 5.87 % | 6.04 % | 122,290 | 13.78 | 27 | -0.0773 % | 3,205.0 |
| Insurance Straight | 5.55 % | 5.57 % | 61,315 | 14.58 | 22 | -0.6442 % | 3,275.6 |
| FloatingReset | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0773 % | 3,812.7 |
| FixedReset Prem | 5.98 % | 4.41 % | 87,481 | 2.01 | 21 | 0.1027 % | 2,654.6 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0773 % | 3,276.2 |
| FixedReset Ins Non | 5.29 % | 5.48 % | 91,134 | 14.40 | 14 | 0.1815 % | 3,126.5 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| GWO.PR.S | Insurance Straight | -7.86 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-03-18 Maturity Price : 21.29 Evaluated at bid price : 21.56 Bid-YTW : 6.10 % |
| GWO.PR.M | Insurance Straight | -5.53 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-03-18 Maturity Price : 23.63 Evaluated at bid price : 23.90 Bid-YTW : 6.08 % |
| CCS.PR.C | Insurance Straight | -1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-03-18 Maturity Price : 22.40 Evaluated at bid price : 22.66 Bid-YTW : 5.52 % |
| IFC.PR.I | Insurance Straight | -1.44 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-03-18 Maturity Price : 23.61 Evaluated at bid price : 23.90 Bid-YTW : 5.66 % |
| ENB.PF.C | FixedReset Disc | -1.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-03-18 Maturity Price : 21.83 Evaluated at bid price : 22.20 Bid-YTW : 6.41 % |
| CIU.PR.A | Perpetual-Discount | -1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-03-18 Maturity Price : 20.31 Evaluated at bid price : 20.31 Bid-YTW : 5.72 % |
| IFC.PR.E | Insurance Straight | -1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-03-18 Maturity Price : 22.92 Evaluated at bid price : 23.20 Bid-YTW : 5.61 % |
| BN.PR.R | FixedReset Disc | -1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-03-18 Maturity Price : 21.50 Evaluated at bid price : 21.82 Bid-YTW : 6.12 % |
| GWO.PR.Y | Insurance Straight | 1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-03-18 Maturity Price : 20.24 Evaluated at bid price : 20.24 Bid-YTW : 5.58 % |
| FTS.PR.F | Perpetual-Discount | 1.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-03-18 Maturity Price : 22.30 Evaluated at bid price : 22.57 Bid-YTW : 5.46 % |
| TD.PF.I | FixedReset Prem | 2.06 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2027-10-31 Maturity Price : 25.00 Evaluated at bid price : 26.28 Bid-YTW : 3.57 % |
| CU.PR.F | Perpetual-Discount | 3.55 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-03-18 Maturity Price : 20.40 Evaluated at bid price : 20.40 Bid-YTW : 5.57 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BN.PF.B | FixedReset Disc | 53,200 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-03-18 Maturity Price : 23.29 Evaluated at bid price : 24.77 Bid-YTW : 5.79 % |
| ENB.PF.A | FixedReset Disc | 50,000 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-03-18 Maturity Price : 22.42 Evaluated at bid price : 23.10 Bid-YTW : 6.22 % |
| NA.PR.S | FixedReset Prem | 40,700 | YTW SCENARIO Maturity Type : Call Maturity Date : 2029-05-15 Maturity Price : 25.00 Evaluated at bid price : 26.20 Bid-YTW : 4.77 % |
| MFC.PR.L | FixedReset Ins Non | 40,000 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-03-18 Maturity Price : 23.29 Evaluated at bid price : 24.85 Bid-YTW : 5.32 % |
| MFC.PR.N | FixedReset Ins Non | 27,600 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-03-18 Maturity Price : 22.69 Evaluated at bid price : 23.65 Bid-YTW : 5.61 % |
| MFC.PR.I | FixedReset Ins Non | 24,500 | YTW SCENARIO Maturity Type : Call Maturity Date : 2027-09-19 Maturity Price : 25.00 Evaluated at bid price : 25.57 Bid-YTW : 4.41 % |
| There were 11 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| See TMX DataLinx: ‘Last’ != ‘Close’ and the posts linked therein for an idea of why these quotes are so horrible. | ||
| Issue | Index | Quote Data and Yield Notes |
| GWO.PR.S | Insurance Straight | Quote: 21.56 – 23.75 Spot Rate : 2.1900 Average : 1.3163 YTW SCENARIO |
| GWO.PR.M | Insurance Straight | Quote: 23.90 – 25.50 Spot Rate : 1.6000 Average : 0.9310 YTW SCENARIO |
| CIU.PR.A | Perpetual-Discount | Quote: 20.31 – 21.50 Spot Rate : 1.1900 Average : 0.8565 YTW SCENARIO |
| PVS.PR.J | SplitShare | Quote: 25.25 – 25.78 Spot Rate : 0.5300 Average : 0.3306 YTW SCENARIO |
| IFC.PR.A | FixedReset Ins Non | Quote: 21.36 – 22.35 Spot Rate : 0.9900 Average : 0.7965 YTW SCENARIO |
| IFC.PR.E | Insurance Straight | Quote: 23.20 – 23.76 Spot Rate : 0.5600 Average : 0.3920 YTW SCENARIO |