Monday Market Minute | Jan 23, 2023
The Bank of Canada prepared to deliver what markets expected to be the final hike of the cycle, with a conditional pause widely anticipated at the January 25 decision.
What Moved
Markets entered the week pricing in a near-certain 25bps hike at the January 25 BoC decision, which would bring the overnight rate to 4.50%. The critical question was not the hike itself but the forward guidance — Governor Macklem had telegraphed a "conditional pause" framework, meaning the Bank would hold steady provided inflation continued to moderate. December CPI had come in at 6.3%, down from the June peak of 8.1% but still well above target.
Why It Matters
A confirmed pause would be the single most important signal for Canadian private markets in months. For private credit, it meant locking in peak yields. For housing, it meant the worst of the affordability squeeze was over. For PE, it meant financing costs would stabilize, finally allowing reliable deal underwriting. The word "conditional" mattered enormously — it kept the door open for resumption if inflation reaccelerated.
Signal to Watch
The tone of the Monetary Policy Report accompanying Wednesday's decision would reveal whether the BoC was genuinely confident or hedging against an inflation comeback.