21 Mar 2025

The Canadian Dollar experienced volatility on Thursday, initially declining before rebounding by 0.6%. This fluctuation occurred as traders processed the Bank of Canada's (BoC) newly announced policy guidance. During a speech at the Calgary Economic Development meeting, BoC Governor Tiff Macklem revealed a change in the central bank's approach, indicating that the unpredictable nature of U.S. trade tariffs has compelled the BoC to adopt a more flexible and expedited strategy regarding interest rates, with reduced reliance on forecasts to enhance accuracy.

In a notable move, the BoC has lowered interest rates for the seventh consecutive time, even as the Canadian economy faces another wave of inflation. Recent inflation data released on Thursday showed that both Canadian Industrial Product Prices and the Raw Material Price Index increased more than anticipated in February.

Key market developments include: the CAD's fluctuations as the BoC unveils its policy adjustments.

Governor Tiff Macklem announced a shift in the BoC's approach to rate-setting, aiming to decrease forecasts to improve precision.
This change is designed to allow the Canadian central bank to respond swiftly to shocks in domestic data, particularly in light of the economic impact of U.S. tariffs.
Despite evident concerns that might necessitate a structural adjustment from the BoC, Governor Macklem maintained that there are no clear indications of issues within Canadian data.
In February, Canadian Industrial Product Prices rose by 0.4% month-over-month, slightly surpassing the expected increase of 0.3%. The previous month's figure was revised down to 1.4%.
he Canadian Raw Material Price Index also saw an increase in February, rising by 0.3% month-over-month, contrary to the anticipated contraction of 0.3%. The January figure was also subject to a slight revision.