• Personal banking revenue rose 18% year over year, reflecting higher interest rates.
• Fixed income markets revenue climbed 4% year over year, though that was offset by declines in investment banking and equity market revenue.

Citigroup (C) earnings Q1 2023 (cnbc.com)

• Here’s how the bank did: Adjusted earnings of $4.32 per share vs. $3.41 estimate
• Revenue of $39.34 billion vs. $36.19 billion estimate
• The bank also boosted a key piece of guidance: Net interest income will be about $81 billion this year, about $7 billion more than their previous forecast.

JPMorgan Chase (JPM) earnings 1Q 2023 (cnbc.com)

U.S. applications for jobless benefits rose to their highest level in more than a year, but remain at relatively low levels despite efforts by the Federal Reserve to cool the economy and job market in its battle against inflation.

Jobless claims in the U.S. for the week ending April 8 rose by 11,000 to 239,000 from the previous week, the Labor Department said Thursday. That’s the most since January of 2022 when 251,000 people filed for unemployment benefits.

The four-week moving average of claims, which evens out some of the week-to-week fluctuations, rose by 2,250 to 240,000. That’s the most since November of 2021.

Last week, the Labor Department unveiled revised estimates of the number of weekly applications for jobless benefits under a new formula it is using to reflect seasonal adjustments. The new formula, which led to an increase in its weekly tally, is intended to more accurately capture seasonal patterns in job losses.

Applications for unemployment benefits are broadly seen as reflective of the number of layoffs in the U.S.

The job market seems to be finally showing some signs of softening, more than a year after the Federal Reserve began an aggressive campaign to cool inflation by raising its benchmark borrowing rate nine times in about a year.

America’s employers added a solid 236,000 jobs in March, suggesting that the economy remains on solid footing despite the nine interest rate hikes the Federal Reserve has imposed over the past year in its drive to tame inflation. The unemployment rate fell to 3.5%, just above the 53-year low of 3.4% set in January.

In its latest quarterly projections, the Fed predicts that the unemployment rate will rise to 4.5% by year’s end, a sizable increase historically associated with recessions.

Also last week, the Labor Department reported that U.S. job openings slipped to 9.9 million in February, the fewest since May 2021.

Some details from Friday’s Labor Department report raised the possibility that inflationary pressures might be easing and that the Fed might soon decide to pause its rate hikes. Average hourly wages were up 4.2% from 12 months earlier, down sharply from a 4.6% year-over-year increase in February.

Also Thursday, the government reported that wholesale prices fell sharply in March. One day earlier, the government said consumer prices rose just 0.1% from February to March, down from 0.4% from January to February and the smallest increase since December. However, prices are still rising fast enough to keep the Federal Reserve on track to raise interest rates at least once more, beginning in May.

Layoffs have been mounting in the technology sector, where many companies hired aggressively during the pandemic. IBM, Microsoft, Salesforce, Twitter and DoorDash have all announced layoffs in recent months. Amazon and Facebook have each announced two sets of job cuts since November.

About 1.81 million people were receiving jobless aid the week that ended April 1, a decrease of 13,000 from the week before. That number is close to pre-pandemic levels.

• Dominion Voting System’s defamation lawsuit against Fox Corp. and its cable TV networks will go to trial on Monday.
• Industry analysts and experts watching the case say the biggest consequence to the company will likely be financial, as viewership and advertising remain steady.
• But the outcome of the case is far from clear, and neither side appears interested in settling.

Dominion Voting System’s defamation lawsuit against Fox Corp. and its cable TV networks will go to trial in the coming days, but it remains to be seen what, exactly, the lawsuit means for Fox and its business.

Dominion brought its lawsuit against Fox and its TV networks, Fox News and Fox Business, in March 2021, arguing their hosts pushed false claims that Dominion’s voting machines were rigged in the 2020 presidential election that saw Joe Biden triumph over Donald Trump. The trial begins on Monday.

IAC Chairman Barry Diller, who was chairman and CEO of parent-company Fox from 1984 to 1992, said at a media conference hosted by startup Semafor earlier this week that although he thought Fox should lose the case, handing Dominion “a very big reward,” that the company will just pay the damages and move on.

“What’s it going to do? Worsen [Fox Corp. Chair] Rupert Murdoch’s reputation?” Diller joked.

WATCH NOW

VIDEO02:34

Fox News sanctioned for withholding evidence in Dominion lawsuit

On its face, the biggest potential consequence for Fox would be a financial hit: The company will have to pay to defend itself against the claims and, if it loses, possible damages to Dominion, upwards of $1.6 billion. No matter the outcome, an appeal is likely.

Fox, which has denied the claims made by Dominion and said it is protected by the First Amendment, has opposed the amount of the damages that the voting machine maker is seeking. The Delaware judge overseeing the case — who ruled a trial was necessary — recently said it would be up to a jury to decide the matter. 

Business risk

Neither side has shown signs of a wanting to settle the case, and the two parties have met once at a court-ordered meeting. But even if they did come to a settlement, Fox would still be on the hook for a steep payment, experts say.  

“There could be a lot of implications depending on how it plays out,” said Imraan Farukhi, an assistant professor at Syracuse University’s S.I. Newhouse School of Public Communications. Besides the financial impact, Farukhi added, “The other question is what will they do with their talent if they lose? The majority of the stars at Fox are implicated. Any other news organization would have probably seen their hosts losing their jobs for improper reporting.”

Lou Dobbs, who is slated to be a witness, saw his weekday program on the Fox Business network canceled the day after he was named a defendant in the defamation lawsuit of a second voting machine company, Smartmatic. At the time, Fox said his show’s cancellation was in the works prior to the lawsuit.

Shows helmed by Tucker Carlson, Maria Bartiromo, Sean Hannity, Laura Ingraham and Jeanine Pirro have been listed as evidence by Dominion. Those hosts also are slated to testify in Dominion’s case.

On Wednesday, the Delaware judge overseeing the case sanctioned Fox for withholding evidence and reportedly said if depositions or anything else needed to be redone, it would come at a cost to the company.

But the most likely immediate effect on Fox and its bottom line could come in the form of libel training classes for talent and others in the newsroom, as well as an increase in production insurance policies that cover defamatory statements, Farukhi said. Those policies could also help cover the costs related to the lawsuit for Fox.

Still, a near-term financial impact is unlikely to spell disaster for the network.

As thousands of documents have been unveiled in recent months, revealing skepticism from Fox’s top TV hosts and executives about the election-fraud claims that were made on air, Fox News’ ratings have remained stable, according to Nielsen. Similarly, so has the parent company’s stock price. 

Fox Corp. Class A

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Fox Corp.’s stock has remained stable in recent months as evidence implicating its TV hosts and executives have come to light in Dominion’s defamation lawsuit.

Fox News’ steady audience has also ensured that advertisers stick around, too. Oftentimes, companies will pull their ads when TV networks are embroiled in controversy. For Fox, that hasn’t been an issue in its lawsuit battle with Dominion. 

“I am hesitant to say how this could implicate their business when it comes to viewership and sponsors,” Farukhi said. “Their audience and sponsors seem to not really care what the network is being accused of in this case. They only stop viewing Fox when it provides information that is not congruent with their predetermined conclusions.”

Fox Corp. CEO Lachlan Murdoch sounded confident about the network’s future when asked during a March investor conference if he could share anything about the case.

“I think fundamentally what I’ll just say about it is that a news organization has an obligation and it is an obligation to report news fulsomely, and without fear or favor,” Murdoch said at the time. “That’s what Fox News has always done and that’s what Fox News will always do.” 

He added that “the noise that you hear about this case is actually not about the law and it’s not about journalism and it’s really about politics.”  

No other questions were asked during the conference. 

Amendment protections

Fox has continuously denied the claims made against its network and hosts, arguing the case is about First Amendment protections “of the media’s absolute right to cover the news.” Attorneys have argued that covering the allegations being made by Trump and his attorneys was newsworthy and protected by the First Amendment. 

For that reason, the case has been closely watched by First Amendment experts. While it’s difficult to prove a defamation case in the U.S., many believe there’s enough evidence this time that it could happen. 

“The fact that the lawsuit hasn’t settled yet, and Dominion likely doesn’t want to settle, shows they have a good likelihood of prevailing,” said Gautam Hans, an associate law professor and First Amendment expert at Cornell University. “There’s been a lot of embarrassing, contradictory statements that have come out from the discovery process that even if Dominion loses there will have been pain inflicted on Fox along the way.” 

The evidence gathered for the case — which includes text messages, emails and other internal communications between Fox’s executives, TV hosts, producers and others tied to the newsroom — shows those at the network and parent company were skeptical of what was being reported.

The elder Murdoch, the Fox Corp. chair, suggested the TV hosts “went too far,” and said during his deposition that some of the network’s commentators “endorsed” the claims. 

Paul Ryan, the former Republican speaker of the House and a Fox board member, told Rupert and Lachlan Murdoch “that Fox News should not be spreading conspiracy theories,” according to court papers. 

Fox News host Carlson said in a text message to his producer that pro-Trump attorney Sidney Powell was lying, according to court papers. In other texts, Carlson said, “It’s unbelievably offensive to me. Our viewers are good people and they believe it.” 

• Amazon Web Services is launching the Bedrock service for generative artificial intelligence in limited preview.
• Through Bedrock, clients can use language models from Amazon and startups AI21 and Anthropic, as well as Stability AI’s model for turning text into images.
• Amazon said Pegasystems, Deloitte and Accenture and are among the companies looking forward to using Bedrock

AWS launches Bedrock generative AI service, Titan LLMs (cnbc.com)

Brookfield Infrastructure Partners LP BIP-UN-T -0.32%decrease is acquiring the world’s largest freight container player, Triton International Ltd., for US$4.7-billion in cash and shares, as the industry seeks to rebound from an inventory overhang in some areas that is weighing on demand.

Brookfield is paying US$85 a share for Triton, US$68.50 of which will be paid in cash and the rest in class A exchangeable shares. The deal is a 35-per-cent premium to Triton’s closing price on Tuesday.

Shares of Triton jumped 32 per cent Wednesday on the New York Stock Exchange, closing at US$83.34. Including debt, the transaction is valued at about US$13.3-billion.

Triton is the world’s largest owner and lessor of freight containers, with a container fleet that encompasses more than seven million 20-foot equivalent units. “Triton is an attractive business with highly contracted and stable cash flows, strong margins and a track record of value creation,” Sam Pollock, chief executive of Brookfield, said in a news release.

“Brookfield Infrastructure’s significant resources and long-term investment horizon will support Triton’s franchise, underpin our commitment to providing unrivalled service, and support continued investment in our growing business,” said Brian Sondey, CEO of Triton.

Pending approval by Triton’s shareholders and required regulatory approvals, the transaction is expected to close in the fourth quarter.

More than 80 per cent of the world’s goods are transported by shipping containers sailing across the seas, according to the International Monetary Fund.

The COVID-19 pandemic led to widespread problems in global supply chains, but many of the issues are now being resolved. Still, shifts in consumer demand have led to some imbalances in the market. According to market forecaster Container xChange, the shipping industry is experiencing a freight recession as retailers who overstocked use up their excess stock.

The latest Drewry World Container Index, at US$1,710 a 40-foot container, is 36 per cent lower than its 10-year average of US$2,689 and down 79 per cent from a year ago, but 20 per cent higher than average prepandemic rates in 2019.

A survey conducted in April by Container xChange indicates that 48 per cent of supply chain professionals expect the shipping industry to strengthen this year and surpass last year’s peak.

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The Pierre Elliott Trudeau Foundation is planning an outside review of a controversial Beijing-linked donation, after concerns were raised internally about possible wrongdoing.

Conversations with four key people associated with the Trudeau Foundation show an organization bitterly divided over how to handle the 2016 gift, which The Globe and Mail reported in late February came from the government of China as part of an influence operation to curry favour with Prime Minister Justin Trudeau. The Globe is not identifying the sources, because they were not authorized to discuss internal foundation matters.

Since The Globe report, senior staff and board members who joined the foundation after 2016 have discovered that the donor of record was Millennium Golden Eagle International, a Chinese state-affiliated company run by billionaire Zhang Bin. They have also learned that associated tax receipts may not be accurate. Mr. Zhang is a political adviser to the government in Beijing and a senior official in China’s network of state promoters around the world.

One source familiar with the matter said the China Cultural Industry Association – a state-backed group in Beijing that aims to build “the soft power of Chinese culture” globally – contacted the Trudeau Foundation at the outset to dictate what name and address should be put on the tax receipt for the gift.

Officials with the association asked the Trudeau Foundation to refrain from using the names of Mr. Zhang and fellow billionaire Niu Gensheng, the men whom the foundation publicly identified as the donors. Instead, the officials asked the foundation to attribute the donation to Millennium Golden Eagle International’s Canadian subsidiary, the source said. And they asked that the tax receipt be linked to an address in Hong Kong rather than the company’s Canadian address – which is a large house, with a pool and basketball court, in the Montreal suburb of Dorval.

A copy of the receipt for the first instalment of the donation, obtained by The Globe and Mail under access-to-information law, confirms the name and address on the receipt: it does not bear the names of Mr. Zhang and Mr. Niu. Instead it names Millennium Golden Eagle International (Canada) as the donor and lists an address in Hong Kong.

The same trove of documents obtained under access to information also shows that the Chinese cultural group later asked that the tax receipt be reissued to its address in Beijing, not the address in Hong Kong.

A Globe reporter visited the address in Hong Kong, which now appears to be occupied by a different company. An employee who answered the door had never heard of Millennium Golden Eagle. The company does not appear to ever have been registered in Hong Kong.

Clark: Too many lines converge at the intersection of Trudeau and foundation

At a contentious Trudeau Foundation board meeting on March 31, the sources said, the board passed a resolution to hold an independent forensic audit of the donation, including examination of all related e-mails and interviews with anyone involved with the gift. It also asked directors who were board members at the time of the donation to avoid interfering in the investigation.

On April 6, Ted Johnson, a former top aide to the late former prime minister Pierre Trudeau, sent an e-mail saying the foundation would proceed with what should be “described as an independent review.” The letter, which was obtained by The Globe, did not mention a forensic audit, and said the terms of reference would have to be approved by the board. Two sources told The Globe the outside review will include a forensic audit.

Once the terms of reference are approved, an independent committee will oversee the investigation, two sources said.

The sources also confirmed that the taxpayer-funded Trudeau Foundation has been unable to return $140,000 to Mr. Zhang, who, along with Mr. Niu, had promised it $200,000 but only delivered 70 per cent of the money.

The two men also pledged $750,000 to the University of Montreal law school, where Pierre Trudeau once studied and later taught law. Another $50,000 was pledged to commission a statue of the former prime minister that was never built.

Two sources said the Trudeau Foundation tried in March to send a refund cheque by Canada Post to the Dorval address of Millennium Golden Eagle International (Canada), but that there was no one at the residence to accept the money.

A foundation document, first obtained by La Presse, says that one of the foundation’s members (members appoint the foundation’s board and auditor) later phoned a senior staff member to say the “real donor” was not the same as the donor “on the tax receipt issued by the foundation in 2016 and 2017.″

The member, who was a director of the foundation in 2016, urged the staff member to hand-deliver the $140,000 cheque to the real donor “as the only way to protect the Foundation and turn the page,” according to the document, which was sent to the foundation’s board on March 29. It is unclear who the member believed the real donor to be.

The document says the staff member, who never learned the identity of the alleged real donor, refused to do so, saying it would not “only be unethical but illegal as this is a third party” with which the foundation has no relationship.

The agreement with the two Chinese businessmen who initially took credit for the donation was signed by Alexandre Trudeau, brother of Prime Minister Justin Trudeau and a foundation board member at the time. The other signatories were then-University of Montreal rector Guy Breton and then-law school dean Jean-Francois Gaudreault-DesBiens, university spokesperson Genevieve O’Meara said.

Foundation policy in 2016 required acceptances of gifts under $1-million to be signed by the organization’s president and chief executive, who at the time was Morris Rosenberg, a former senior civil servant. (Mr. Rosenberg was recently tapped by the Prime Minister to investigate Chinese interference in the 2021 federal election.) Gifts over $1-million needed to be signed by the board. The foundation was set up with a $125-million endowment from the Jean Chrétien government in 2002.

On Monday, the foundation’s board of directors and its president and chief executive, Pascale Fournier, resigned, citing political backlash from the donation. One source said the resignations had happened because of a “corrosive atmosphere” where people had become “suspicious of each other.”

After the resignations on Monday, one source told The Globe they had expressed concern to the foundation’s leadership that Mr. Johnson and Trudeau family friends Bruce McNiven and Peter Sahlas should not be involved in any aspect of the outside review. The three men remain on the foundation’s board on an interim basis until new directors are selected by the foundation’s members, who met Wednesday to discuss the turmoil.

In February, The Globe first reported that the Canadian Security Intelligence Service had captured a conversation in 2014 between an unnamed commercial attaché at one of China’s consulates in Canada and Mr. Zhang.

The pair discussed the federal election that was expected to take place in 2015, and the possibility that the Liberals would defeat Stephen Harper’s Conservatives and form the next government, according to a national-security source. The source said the diplomat instructed Mr. Zhang to donate $1-million to the Trudeau Foundation, and told him the Chinese government would reimburse him for the entire amount.

The Globe is not identifying the source, who risks prosecution under the Security of Information Act.

With a report from James Griffiths in Hong Kong

Canada’s main stock index rose on Wednesday after the Bank of Canada kept interest rates unchanged, while signs of cooling inflation in the U.S. boosted investor sentiment on hopes of a dovish Federal Reserve.

At 10:17 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 155.98 points, or 0.76%, at 20,577.83.

The Bank of Canada kept its key overnight interest rate on hold at 4.50% as expected and raised its growth forecast for this year to 1.4% from 1.0% in January, while dropping language that had warned of a possible recession.

“The decision itself really was no surprise,” said Douglas Porter, chief economist at BMO Capital Markets.

“The comment that recent data is reinforcing the governing council’s confidence that inflation will continue to decline in the next few months is somewhat beneficial for equities.”

Across the border, data showed that U.S. headline CPI cooled faster than expected in March, raising hopes that the Federal Reserve could hit pause on its interest rate hiking cycle soon.

Canadian government bond yields were lower across the curve, tracking the move in U.S. Treasuries. The 10-year eased to 2.892%.

Strength in crude and gold prices against the dollar lifted the energy sector and the materials sector, up 0.7% and 0.8%, respectively.

The rate-sensitive technology sector gained 1.7%, led by a 5.5% rise in shares of Shopify Inc on JMP Securities’ rating upgrade.

The financials sector, a heavyweight on the TSX, advanced 0.6%.

The TSX had gained on the previous three days as well, helped by rising crude and spot gold prices.

Among other major movers, Brookfield Infrastructure fell 2.7% after the company said it would buy intermodal container lessor Triton International Ltd for about $4.7 billion.

U.S. stock indexes were higher on Wednesday after data showed consumer prices cooled faster than expected in March, raising hopes that the Federal Reserve could hit pause on its interest rate hiking cycle soon.

The Labor Department data showed headline and core CPI in March rose 0.1% and 0.4%, respectively, on a month-on-month basis. Economists were expecting a rise of 0.2% and 0.4%, respectively.

On a year-over-year basis, the headline number rose 5% against economists’ estimates of a 5.2% rise, while the core measure, which strips out volatile food and energy prices, climbed 5.6% in-line with consensus estimates.

“Today’s CPI takes some heat off the Fed, for now. Moderating price pressures combined with signs of cooling in the labor market will offer a temporary reprieve to markets,” said Ronald Temple, chief market strategist at Lazard.

“While this is good news, it does not mean tightening is over. Core inflation remains far above the Fed’s target, and the path to 2% will be bumpy.”

Stubbornly high rents kept underlying inflation pressures simmering, likely ensuring that the U.S. central bank will raise interest rates again next month.

Traders mostly stuck to bets that the Fed will hike rates by 25 basis points next month, with Fed fund futures pricing in a 70% chance of such a move.

After the banking turmoil last month, investors were betting that the Fed will soon end its aggressive monetary tightening campaign and also start cutting rates in the back half of the year amid growing concerns of a recession.

Major technology and other growth stocks such as Microsoft Corp, Tesla Inc and Apple Inc edged higher as Treasury yields slipped.

Minutes from the U.S. central bank’s policy meeting in March will also be watched closely by investors later in the day for further clues on the trajectory of interest rates. The Fed raised rates by 25 bps last month and signaled it was on the verge of pausing further rate hikes.

Investors are also awaiting the first-quarter earnings season, which begins in earnest on Friday with results from three major banks, Citigroup Inc, JPMorgan Chase & Co and Wells Fargo & Co.

The Dow Jones Industrial Average was up 155.96 points, or 0.46%, at 33,840.75, the S&P 500 was up 13.20 points, or 0.32%, at 4,122.14, and the Nasdaq Composite was up 9.36 points, or 0.08%, at 12,041.24.

American Airlines Group Inc dropped 7.1% as it forecast a lower-than-expected profit for the first quarter as the carrier battles high fuel costs.

The wider airlines index fell nearly 4%.

U.S.-listed shares of Chinese firms Alibaba Group Holding Ltd and JD.com Inc fell almost 4% each as investors weighed rising geopolitical tensions.

Taiwan said on Wednesday it had successfully urged China to drastically narrow its plan to close air space north of the island, averting wider travel disruption in a period of high tension in the region due to China’s military exercises.

Reuters

The Bank of Canada Wednesday left its key overnight interest rate on hold at 4.50% as expected and raised its growth forecast for this year, while keeping the door open to further rate hikes if the economy and inflation remain heated.

Markets took the news in stride. Canada’s 2-year bond yield, which is sensitive to changes in monetary policy, was down about 5 basis points in late morning trading. But that was mostly just following a dip in the U.S. bond yield of the same tenure, following a U.S. inflation report today that was modestly tamer than the Street consensus. The Canadian dollar saw choppy trading throughout the morning and didn’t establish any sustainable push in either direction.

Interest rate probabilities, based on trading in swaps markets, are pricing in a 25 basis point cut in the Bank of Canada’s overnight rate by December – unchanged from prior to both the Bank of Canada’s interest rate announcement this morning and the U.S. inflation report. Just a week ago, 50 basis points worth of rate cuts had been priced into markets by the end of this year.

Here’s how money markets are pricing in further moves in the Bank of Canada overnight rate for this year as of 11 am ET. While the bank moves in quarter point increments, credit market implied rates fluctuate more fluidly and are constantly changing.

MEETING DATE	IMPLIED RATE	BASIS POINTS
7-Jun-23	4.4844	-0.31
12-Jul-23	4.4745	-1.29
6-Sep-23	4.4611	-2.64
25-Oct-23	4.3535	-13.4
6-Dec-23	4.2361	-25.14

And here’s how economists and market strategists are reacting:

Avery Shenfeld, chief economist, CIBC World Markets

The Bank of Canada’s current motto is “don’t just do something, sit there,” and patience should indeed be a virtue in getting inflation down to target without inflicting more pain on the economy than necessary. By including a warning that a further hike could still be required if the economy remains too heated, they are still far from being in line with market hopes for a rate cut later this year, and consistent with our view that we’ll have to wait until 2024 to get any interest rate relief.

As widely expected, the Bank left the overnight rate at 4.5%, and if there was a theme in their statement and the Monetary Policy Report, it was to do as little tinkering as possible with the overall outlook. The inflation outlook was essentially unchanged with the CPI reaching the 2% target late next year, the neutral rate of interest remained at 2.5%, and Q1 growth was just enough to leave the output gap where it stood in Q4. …

Despite an upside surprise in Q1 growth, the Bank remains hopeful that their desired slowdown is coming, citing expectations for a cooling internationally, and the lagged impacts of higher interest rates on Canadian households and business investment. So much of the upward revision in the 2023 growth outlook, with raised the pace to 1.4% from 1.0%, came from the better start to the year. Still, what’s encouraging is that the Bank doesn’t see an outright recession as necessary to get inflation back to target, only a slowing to “weak” but still-positive growth over the balance of the year. To get to the prior forecast for the level of real GDP, the Bank has trimmed its growth pace for 2024 by a half point to 1.3%, but that would include a pick-up on Q4/Q4 basis from what they expect over the rest of this year. …

In the near term, our growth forecasts are not far off those of the Bank, and still not quite meeting the definition of a full-blown recession. The Bank’s messaging still has a hawkish tilt, despite its decision to leave interest rates on hold. The emphasis in the statement is on the cup being only half full when it comes to having the ingredients needed to meet its inflation targets. Labour markets are still too tight, wages gains are elevated, the economy is in excess demand, and while headline inflation has eased a lot, some of the underlying measures are inconsistent with a sustained 2% inflation rate. The interest rate decision notes that the committee is still judging whether policy is tight enough, not whether it is too tight. That needn’t indicate a lot of risk of an actual rate hike in June if, as we expect, the growth numbers decelerate in upcoming months. But the messaging might help the Bank by countering the recent downward drift in bond yields, which threatens to provide a premature easing in term borrowing costs across the economy.

David Rosenberg, founder of Rosenberg Research

With all the commentary and caveats, the Bank managed to leave the bond market and Canadian dollar unchanged. No reason for anyone to change their views here. Our view is that the Canadian economy, much like the U.S., is going to be cooling off very rapidly in coming quarters and that inflation will be surprising to the downside. If you ask me the most important takeaway here, it was the comment that the economy will be moving into an “excess supply” environment in the second half of the year. Even with a higher real GDP forecast for 2023 (due principally to an early-year bounce) and lower estimates for potential growth, there is no economic construct either on practical or theoretical grounds that will fail to cause inflation to decelerate — what the Bank is focused on is the speed of the deceleration, but we are convinced that the destination will come sooner, not later, and that means a bullish bent for the GoC bond market and a bearish bias for the loonie (all the more so if the IMF is prescient on its downbeat global macro call, with negative implications for commodity markets and Canada’s terms-of-trade). Demand growth of just +1.4% this year (was +1.0% prior) and +1.3% in 2024 (a big slice from +1.8% in the previous set of forecasts last January!) — no recession here but “stall speed” nonetheless — are hardly the ingredients for a cyclically-induced inflationary backdrop.

Stephen Brown, deputy chief North America economist, Capital Economics

The Bank of Canada delivered mixed messages today, noting that it is more confident that inflation will decline in the next few months but less confident that inflation will return to 2% as quickly as it previously anticipated. Nonetheless, with the Bank’s forecasts for both GDP growth and inflation still looking too high to us, we continue to expect the Bank’s next move to be an interest rate cut. …

On the face of it, the modest change to the language in the final paragraph of the statement seems somewhat hawkish, with the Bank dropping the previous reference that it expects to keep the policy rate on hold, and instead noting that it “continues to assess whether monetary policy is sufficiently restrictive to relieve price pressures and remains prepared to raise the policy rate further if needed”. This change is presumably a nod to the fact that the Bank has pushed back the timing of when it expects CPI inflation to reach 2%, to late 2025 from late 2024. We would not read too much into the change, however, as the Bank still forecasts inflation to be very close to 2% over the second half of 2024 and the rest of the policy statement was more dovish. While the Bank recognized that the Canadian and US economies both made stronger-than-expected starts to the year, it stressed that, following the issues in the banking sector, “US growth is expected to slow considerably in the coming months, with particular weakness in sectors that are important for Canadian exports”. That ultimately caused the Bank to downgrade its forecast for Canadian GDP growth in 2024 to 1.3%, from 1.8%, although it pushed up its forecast for this year to 1.4%, from 1.0%, due to the strong first quarter.

Meanwhile, the Bank trimmed its estimates for potential GDP growth in the coming years, but left its estimate of the neutral policy rate unchanged at between 2% and 3%. Despite lower potential GPD growth, the Bank still expects excess supply to open up in the second half of 2023 as GDP growth slows well below its full potential. We continue to see both GDP growth and core inflation slowing even faster than the Bank assumes, with a modest recession likely, leading us to think that the Bank will be ready to cut interest rates in October.

James Orlando, director & senior economist, TD Economics

The BoC held the line in today’s announcement. While it acknowledged that the economy is exhibiting cyclical strength as evidenced by strong employment gains and a bounce-back in consumer spending, it appears confident that growth is set to slow in the coming months. This slowdown, though delayed, has kept the faith that inflation will continue to decelerate, hitting 3% year-on-year this summer.

Over the last couple of weeks, the timing of rate cuts has been pushed out, with markets now expecting the first cut to occur in December (from September). This reflects the economy’s cyclical rebound, which will keep underlying cyclical inflationary pressures (supercore) elevated through this year. As the BoC acknowledged, this could make “getting inflation the rest of the way back to 2%” more difficult. Given this backdrop, we think the best policy for the BoC is to keep rates stable until cyclical inflation dynamics turn decisively lower.

Douglas Porter, chief economist, BMO Capital Markets

While there was little suspense surrounding today’s Statement, the Bank’s revised economic and inflation forecast had some wrinkles. Even with lighter-than-expected flat GDP growth in Q4, a solid start to 2023 has boosted this year’s growth estimate 4 ticks to 1.4% (we’re at 1.0%). The global growth backdrop is better than expected, though the Bank continues to look for a slowdown in the coming months (both globally and domestically), citing the lagged effects of rate hikes as well as the recent banking sector strains. Governor Macklem said in the press conference that the economy needs a period of cooler growth to corral inflation, although the Bank’s forecast does not include an outright recession. The BoC notes ongoing excess demand in Canada, and while Q1 GDP was above its forecast, it still expected growth to be “weak through the remainder of this year”. Earlier rate hikes are anticipated to have an increasing impact on the economy, with the MPR detailing mortgage renewal dynamics. In fact, a weaker consumer spending and export outlook has prompted a 5-tick downgrade in next year’s growth forecast to 1.3%, matching our call (but the Bank now has growth lower in 2024 than 2023). With consumption poised to cool meaningfully, this “implies the economy will move into excess supply in the second half of this year”. The latter is despite a cut to potential growth estimates, suggesting the BoC could eventually be open to easing if inflation slows below 3%

However, that’s a big “if”, and the BoC remains acutely concerned about inflation. Wages are again noted as rising faster than productivity, even as labour shortages are starting to ease. Headline inflation is still expected to fall to 3% around mid-year, and it shaved the year-end estimate by 1 tick to 2.5%, with a slow move to 2% by the end of 2024. Another mildly dovish remark: “Recent data is reinforcing Governing Council’s confidence that inflation will continue to decline in the next few months.” But that’s promptly offset by concern that getting “the rest of the way back to 2%” could be a challenge. …

On fiscal policy, the Bank estimates that overall additional fiscal spending of $25 billion per year has been added since the January MPR (i.e., during this year’s Budget season). That works out to almost 0.9% of GDP, which is even north of our estimate, and simply drives home the point that generally generous budgets this year are working at cross purposes with the Bank’s restrictive policy—at the margin, further pushing back the day when the Bank can begin cutting rates. And another item keeping inflation pressures aloft, at least in the Bank’s view is “corporate pricing behaviour”, which is at least a small nod that wider margins have been one driver of inflation in the past year. …

Bottom Line: The BoC is comfortably on hold for the time being with inflation slowing in line with its forecast. The Bank’s expectation that the economy will be in excess supply by the second half of the year opens the door a crack to potential easing later this year if inflation continues to slow, but there’s still a lot of wood to chop on that front. In fact, the Governor explicitly stated in the press conference that market pricing of rate cuts later this year isn’t the most likely scenario. We continue to expect the Bank to remain on hold until the end of 2023 before rate cuts begin in earnest in 2024.

Taylor Schleich, Warren Lovely & Jocelyn Paquet, economists with National Bank of Canada

The headline decision itself was pretty straightforward as the criteria for remaining sidelined (i.e., the economy evolving broadly as expected in January), was met. However, the key aspects of the statement are very much open to interpretation and one can spin this any number of ways. To us, the statement is dovish in the near-term (despite the pledge to raise rate further if needed) as the Bank highlights a quick and seemingly high conviction expectation that inflation will fall to the top of the control band by mid-year. They’ve also noted they expect a swing to excess supply in the second half of the year. This suggests the bar to any further hikes is quite high. At the same time, there were a number of signs that the Bank sees inflation pressures as somewhat sticky, admitting that getting price pressures all the way to 2% could prove challenging. This raises some questions as to whether the Bank, when it ultimately does lower rates, will be able to get back within their estimated 2-3% neutral range, or back to pre-COVID policy rates. This reluctance to return to pre-COVID rates of interest is reflected in our interest rate outlook which has the Bank pausing/ending its eventual rate cutting cycle at 3%. More near term, we do think that rate cuts are appropriate/likely before the year is out and don’t view the rate statement as being inconsistent with that. The catalyst for such a pivot is likely be a further deterioration in the economic and inflation outlook. Indeed, we still believe the Bank may be overestimating the path of price pressures. The same goes for the growth outlook which we see as evolving much slower than the MPR pencils in for 2023 and 2024.

Royce Mendes, managing director & head of macro strategy, Desjardins Securities

The policymakers view the evolution of the economy this year very much the same as we do. As households renew their mortgages, more income will be devoted to debt-service costs which will weigh on consumption and GDP. Also similar to our forecast, the Bank of Canada sees economic slack opening up in the second half of this year. By the end of the year, officials see inflation back down to 2.5%. Where we disagree is on the pace of adjustment. We see scope for more economic weakness and a faster return to 2% inflation than the latest projections from the central bank.

We continue to believe that the next move from the Bank of Canada will be a cut. As the lagged impacts of past monetary tightening make their way through the system, we see the economy weakening and inflation returning to the 2% target. At that point, central bankers won’t need to employ such restrictive policy. For now, though, officials will be in a holding pattern. Inflation has shown some signs of progress, but there’s still work to do and it could take the rest of the year to get it done.

Jay Zhao-Murray, FX Market Analyst, Monex Canada

The crux of the matter is that the Bank of Canada is still more concerned about upside risks to inflation, as Macklem made explicit during the presser. While the Governor discounted much of the latest evidence to maintain last quarter’s inflation projections, the reality is that price pressures and the factors which fuel them are stronger than the Bank is letting on. For now, assuming that the Bank’s view that global banking stresses are subsiding holds true, we think that the strong emphasis on “higher for longer” in the press conference should take greater precedence over the statement’s mention that rates could be raised, suggesting a continued pause for the June meeting at least. Clearly, the Bank is going to try to stick to this view until contradictory evidence is so overwhelming that it is forced to change its policy. Whether that change is a rate hike or a cut depends mostly on how the banking story develops. If it fades out, we would expect a probable resumption in the hiking cycle. But should the Bank’s downside risk of a credit tightening-driven global recession materialize, expect the mirror image of the start of the current hiking cycle: previous words will no longer matter, and a pivot to cuts could easily emerge.

Philip Petursson, chief investment strategist, IG Wealth Management

I took the BoC statement as confirmation that we have seen the end of the interest rate increases. What wasn’t as clear, which the market was hoping for, was a firmer comment on the next move being cuts. The statement was definitely not projecting cuts anytime soon by my view. The statement acknowledged some of the weakness in the US and potential weakness in Canada but the tone was still hawkish against inflation with the Bank holding an option for further rate increases.

The risk the bank is playing is holding rates high long enough to satisfy it that inflation will remain within target while hoping the economy holds up. It’s a game of chicken between the economy and inflation to see which one might back down first.

Lesley Marks, chief investment officer, Equities, Mackenzie Investments

The Bank of Canada statement had a new reference on whether monetary policy was sufficiently restrictive to relieve price pressures and restore price stability which may be perceived as hawkish. Although stronger than expected economic data makes it more challenging for the Bank of Canada to remain on hold, stress in the global banking sector is leading to tighter credit conditions and may in turn help do the work of the central bank if these conditions lead to headwinds for economic growth. The bank still expects the economy to slow through the remainder of this year, despite the upside surprise in the first quarter. And, inflation, although still above the bank’s 2% target is declining quickly towards this target rate, also allowing the bank to stay on hold. If the economy shows the expected signs of slowing and inflation tracks lower over the coming months, we believe that the outlook for the Bank of Canada is to remain on hold for now.