ZCAN - Bank Of Canada: Walking A Tightrope

• Canadian government bond yields have increased along with global rates, while the Canadian exchange rate has strengthened against the currencies of Canada's largest trading partners.
• Although the BoC is also likely to pull forward their guidance for when rate hikes are likely to begin (from 2023 to 2022), we don't think they should be in a hurry to raise overnight rates.
• Over the next several quarters, the Bank of Canada will be walking a tight rope, where they must balance the improved growth outlook, which has been driven by external factors, against still weak domestic fundamentals and worsening trends in public health.

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