Royal Bank of Canada: The Central Bank may have ended raising interest rates, but has not yet considered starting an easing cycle

Royal Bank of Canada expects the Central Bank to push back against the market's idea that the bank is about to pivot to interest rate cuts, but the Central Bank may signal an end to quantitative tightening sooner than expected. However, they stressed that the Central Bank is likely to go out of its way to convey that the main objective of this change will be to ensure adequate liquidity in the funding market, rather than hinting at a shift to looser monetary policy and an upcoming rate cut. Given Canada's recent economic developments, RBC said economic activity has been weak enough to ensure that no further rate hikes are needed, but inflation (and wage growth) has been too thorny to push the Central Bank to consider starting an easing cycle.