Daily Macro
Macro Notes - Fed and BoC on Hold
April 30, 2026
i.) First, the Bank of Canada (BoC)
- Unsurprisingly, the Bank left policy rates unchanged.
- Within the MPR, the key signals were that growth were revised higher for 2026 and 2027 by a smidge. However, the corresponding uptick in the range for potential growth suggests little excess slack is being absorbed.
- The Bank is clearly leaving room open for optionality here. However, it’s clear that it is more guarded against inflation risks from higher energy prices. That was apparent from Macklem’s comment that the Bank could hike successive times if energy prices remained elevated.
- Despite the hawkish shift in market pricing, we still expect the Bank to remain on hold in 2026. The next move is likely a hike next year.
ii.) Next, the Federal Reserve
- The hold at 3.75% was fully priced and this is the third consecutive hold in 2026. This meeting was also symbolic as this was Jerome Powell’s last meeting as the Fed chair.
- What was not expected was the number of dissents (four is the most since October 1992). And more importantly, the dissenters were not aligned. The hawkish dissents were not about the decision, but about the implied “easing bias” in the statement. This could become a common theme, as incoming data amplifies the tension between the Fed’s mandate and pressure from the White House.
- The key question now is what Warsh’s Fed looks like. The chair transition and a divided committee argue against a strong directional call on US rates until Kevin Warsh’s first meeting in June.
iii.) Investment implications
- Despite the slight hawkish undertones to today’s BoC, we still see the balance of risks tilted towards inertia until the end of this year. That suggests that there’s value in the front end of the CAD curve and we continue to like ZFS in that backdrop as a tactical trade.
Chart 1: Markets are pricing the BoC to hike by end-2026
Source: Bloomberg, BMO GAM