My highlights from the January 24 Bank Of Canada (BoC) announcement

• Concerns about inflation persist, but the explicit statement on being prepared to raise rates further is dropped.
• Focus shifts from discussing whether interest rates are high enough to when they can be lowered.
• Core inflation measures haven’t shown sustained declines, preventing an immediate shift to rate cuts.
• Wage growth remains high, and a pullback in bond yields has eased financial conditions somewhat.
• Softening economic backdrop increases the likelihood of lower inflation.Unchanged GDP in Q4 is expected, marking a sixth straight drop in per-capita output.
• Unemployment rate edges higher, and employment counts no longer keep up with population growth.
• BoC estimates the output gap to be back below zero by the end of last year, reinforcing the expectation of slowing inflation.
• Overall, the expectation is for the BoC to gradually lower the policy rate by mid-year due to slower price growth and a weakening economic backdrop.