The BoC stood pat:
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%.
Canada’s economy is showing signs of improvement. Growth is picking up and inflation is projected to ease gradually from its recent spike. There are still important risks and uncertainties related to the war in the Middle East and US trade policy.
Since the April Monetary Policy Report (MPR), global economic prospects have been dented by higher oil prices stemming from the Middle East conflict. At the same time, the build-out of artificial intelligence (AI) is supporting economic activity in a growing number of countries. Oil prices are still lower than their peak in April but the situation in the Middle East remains volatile. The path for global inflation is highly dependent on how the conflict unfolds.
The US economy is growing at about 2½%, mostly because of strong consumption and booming AI investment. China’s economy is expanding solidly thanks to robust exports. Economic activity in the euro area has been weighed down by high energy prices, but is expected to strengthen in the second half of the year if energy prices come down as anticipated.
The Bank projects global GDP growth will slow to 2¾% in 2026, mostly because of the effects of the Middle East conflict, and recover to around 3¼% in 2027 and 2028.
Financial conditions in Canada have eased since April and global equity markets have been buoyant. US bond yields have risen, while those in Canada are little changed. This differential has contributed to the depreciation of the Canadian dollar.
Canada’s GDP data over the past year was choppy and growth stalled as the economy adjusted to new tariffs, high uncertainty and slower population growth. Labour market conditions have remained soft, reflecting ongoing economic slack. The unemployment rate was 6.5% in June and has hovered in a range of 6½%-7% since the end of 2024. There are clear signs that economic growth has resumed in the second quarter, with growth estimated at 2½%. While this largely reflects the unwinding of temporary factors, sources of economic growth appear to be broadening.
Recent indicators point to continued solid consumer spending. Housing activity has been weak but looks to be stabilizing. Export growth has resumed and is expected to continue to strengthen, albeit on a lower path. Business investment is projected to pick up modestly, boosted in the near term by the oil and gas sector. Although the Canada-US-Mexico Agreement is now subject to annual reviews, more businesses report they are finding ways to navigate through the uncertainty. Government spending also contributes to higher economic activity over the projection.
Following GDP growth of 0.7% in 2026, the Bank projects the economy will grow by 1.8% in both 2027 and 2028. As the recovery proceeds, economic slack will be gradually absorbed.
CPI inflation rose further to 3.2% in May, mainly because of higher gasoline prices linked to the war in the Middle East. Excluding gasoline, inflation was 2.2% and measures of core inflation remained close to 2%. Near-term inflation expectations are sensitive to changes in gasoline prices but longer-term inflation expectations remain well anchored. War-related cost pressures are still working their way through some consumer prices but are being offset by downward pressure on other prices from continued economic slack. CPI inflation is expected to stay elevated in June and then ease gradually in the coming months, returning to around 2% in early 2027, although this forecast is dependent on the path for oil and gasoline prices. Inflation is forecast to average around 2% in 2027 and 2028, albeit with some monthly fluctuations because of base-year effects.
Governing Council judges the current policy rate remains appropriate to sustain the economic recovery and bring inflation back to the 2% target, in line with the MPR projections. Uncertainty is still high. Governing Council will continue to assess the strength of the Canadian economy and the outlook for inflation, and is prepared to adjust monetary policy as needed. The Bank is committed to maintaining Canadians’ confidence in price stability through this period of global upheaval.
Macklem told the press:
“Obviously, you’ve seen in the last week [oil prices have] gone back up closer to around US$80-US$85, so they’ve backed up quite a bit, although they’re still a lot lower than they were in April. And yes, the longer oil prices stay high, the bigger is the risk that that begins to spill over into the prices of other goods and services, and inflation starts to broaden, it becomes more generalized, and that would certainly be a signal, a warning sign to us. Right now, what you see in the data is that the cause of inflation is very concentrated in gasoline prices. The latest [headline CPI] reading is 3.2 per cent. CPI ex-gasoline is only 2.2 per cent. Our measures of core, trim, and median are very close to 2 per cent. So far, it’s very concentrated in gasoline prices. We will be assessing very closely the spreading. We expect to see some pass through of higher oil prices to other prices, and we’ve built that into our projection.”
The Producer Price Index for final demand dropped 0.3 per cent last month after a downwardly revised 0.6-per-cent increase in May, the Labor Department’s Bureau of Labor Statistics said on Wednesday.
…
A 1.4-per-cent decline in goods prices, the largest since July, 2022, accounted for the decrease in the PPI over the month. Goods prices were weighed down by a 6.4-per-cent drop in the cost of energy products. Wholesale food prices fell 0.6 per cent. Prices for services rose 0.2 per cent. The ceasefire between the United States and Iran collapsed last week after commercial tankers came under fire in the Strait of Hormuz, triggering military strikes between the United States and Iran. Oil prices rose to a four-week high after Washington reimposed a naval blockade of Iran.
And in the best news I’ve had all week:
[the Honourable François-Philippe Champagne] Minister [of Finance and National Revenue] was pleased to share, alongside his provincial and territorial counterparts, Ontario’s commitment to join Canada’s national securities regulatory passport system—an important step toward greater regulatory harmonization across provinces and, importantly, a requisite step to removing outstanding interprovincial trade barriers and growing one Canadian economy.
The TXPR price index set another 52-week high today of 714.52, in front of the old mark of 713.43 set yesterday.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| 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 | -0.0704 % | 2,635.9 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0704 % | 4,963.9 |
| Floater | 5.48 % | 5.59 % | 38,308 | 14.55 | 3 | -0.0704 % | 2,860.7 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0079 % | 3,630.7 |
| SplitShare | 4.80 % | 4.96 % | 61,791 | 2.67 | 5 | -0.0079 % | 4,335.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0079 % | 3,383.0 |
| Perpetual-Premium | 5.68 % | -2.65 % | 56,215 | 0.09 | 7 | 0.3110 % | 3,084.2 |
| Perpetual-Discount | 5.55 % | 5.59 % | 42,067 | 14.52 | 27 | 0.0597 % | 3,402.2 |
| FixedReset Disc | 5.63 % | 5.80 % | 99,867 | 14.00 | 19 | 0.0623 % | 3,379.2 |
| Insurance Straight | 5.41 % | 5.46 % | 49,537 | 14.64 | 20 | 0.2089 % | 3,324.5 |
| FloatingReset | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0623 % | 4,126.0 |
| FixedReset Prem | 5.90 % | 4.57 % | 77,992 | 2.27 | 29 | 0.0905 % | 2,665.3 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0623 % | 3,454.2 |
| FixedReset Ins Non | 5.25 % | 5.24 % | 56,710 | 3.10 | 14 | -0.0560 % | 3,253.8 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BN.PR.R | FixedReset Disc | -4.75 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-07-15 Maturity Price : 22.20 Evaluated at bid price : 22.86 Bid-YTW : 5.96 % |
| PWF.PR.K | Perpetual-Discount | -3.92 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-07-15 Maturity Price : 21.30 Evaluated at bid price : 21.30 Bid-YTW : 5.83 % |
| GWO.PR.Q | Insurance Straight | -2.89 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-07-15 Maturity Price : 22.28 Evaluated at bid price : 22.55 Bid-YTW : 5.75 % |
| MFC.PR.K | FixedReset Ins Non | -2.42 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-07-15 Maturity Price : 23.68 Evaluated at bid price : 25.40 Bid-YTW : 5.37 % |
| ENB.PR.B | FixedReset Disc | -1.53 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-07-15 Maturity Price : 22.63 Evaluated at bid price : 23.20 Bid-YTW : 6.00 % |
| ENB.PF.A | FixedReset Disc | 1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-07-15 Maturity Price : 23.23 Evaluated at bid price : 24.73 Bid-YTW : 5.84 % |
| ENB.PF.K | FixedReset Prem | 1.03 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2028-03-01 Maturity Price : 25.00 Evaluated at bid price : 26.58 Bid-YTW : 2.71 % |
| IFC.PR.K | Insurance Straight | 1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-07-15 Maturity Price : 23.77 Evaluated at bid price : 24.25 Bid-YTW : 5.44 % |
| ENB.PR.J | FixedReset Disc | 1.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-07-15 Maturity Price : 23.42 Evaluated at bid price : 24.93 Bid-YTW : 5.78 % |
| POW.PR.B | Perpetual-Discount | 1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-07-15 Maturity Price : 23.88 Evaluated at bid price : 24.13 Bid-YTW : 5.57 % |
| CCS.PR.C | Insurance Straight | 1.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-07-15 Maturity Price : 23.03 Evaluated at bid price : 23.30 Bid-YTW : 5.40 % |
| MFC.PR.L | FixedReset Ins Non | 1.39 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2029-06-20 Maturity Price : 25.00 Evaluated at bid price : 25.55 Bid-YTW : 5.14 % |
| POW.PR.C | Perpetual-Premium | 1.45 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2026-08-14 Maturity Price : 25.00 Evaluated at bid price : 25.92 Bid-YTW : -34.78 % |
| ENB.PR.T | FixedReset Disc | 1.52 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-07-15 Maturity Price : 23.55 Evaluated at bid price : 25.45 Bid-YTW : 5.65 % |
| PWF.PR.F | Perpetual-Discount | 2.63 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-07-15 Maturity Price : 23.16 Evaluated at bid price : 23.42 Bid-YTW : 5.61 % |
| ENB.PF.C | FixedReset Disc | 2.88 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-07-15 Maturity Price : 23.02 Evaluated at bid price : 24.28 Bid-YTW : 5.90 % |
| GWO.PR.T | Insurance Straight | 4.67 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-07-15 Maturity Price : 23.25 Evaluated at bid price : 23.55 Bid-YTW : 5.50 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BN.PF.F | FixedReset Prem | 135,800 | YTW SCENARIO Maturity Type : Call Maturity Date : 2029-10-01 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 5.26 % |
| BN.PR.K | Floater | 75,600 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-07-15 Maturity Price : 14.07 Evaluated at bid price : 14.07 Bid-YTW : 5.59 % |
| BN.PR.B | Floater | 69,350 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2056-07-15 Maturity Price : 13.99 Evaluated at bid price : 13.99 Bid-YTW : 5.62 % |
| BN.PF.I | FixedReset Prem | 64,200 | YTW SCENARIO Maturity Type : Call Maturity Date : 2027-03-31 Maturity Price : 25.00 Evaluated at bid price : 25.30 Bid-YTW : 4.00 % |
| GWO.PF.A | Perpetual-Premium | 53,300 | YTW SCENARIO Maturity Type : Call Maturity Date : 2035-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.20 Bid-YTW : 5.68 % |
| GWO.PR.Z | Insurance Straight | 26,620 | YTW SCENARIO Maturity Type : Call Maturity Date : 2034-09-30 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 5.62 % |
| There were 7 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 |
| MIC.PR.A | Perpetual-Discount | Quote: 23.10 – 25.99 Spot Rate : 2.8900 Average : 1.8137 YTW SCENARIO |
| GWO.PR.Y | Insurance Straight | Quote: 20.70 – 23.00 Spot Rate : 2.3000 Average : 1.5272 YTW SCENARIO |
| BN.PR.R | FixedReset Disc | Quote: 22.86 – 24.05 Spot Rate : 1.1900 Average : 0.7345 YTW SCENARIO |
| BN.PR.Z | FixedReset Prem | Quote: 25.45 – 26.45 Spot Rate : 1.0000 Average : 0.6032 YTW SCENARIO |
| PWF.PR.K | Perpetual-Discount | Quote: 21.30 – 22.50 Spot Rate : 1.2000 Average : 0.8167 YTW SCENARIO |
| POW.PR.H | Perpetual-Premium | Quote: 25.40 – 26.40 Spot Rate : 1.0000 Average : 0.6721 YTW SCENARIO |