The BoC Might Have to Play Grinch, At Least One More Time

"...It would be a very brave central bank indeed to be even considering hiking rates with the latest quarterly GDP report printing negative."
—BMO Economics

That's the orthodox playbook, anyway.

But the Bank of Canada could unexpectedly take the road less travelled, kind of like the Detroit Lions faking a punt inside their 20-yard line on Thursday, with 27 million fans watching.

The BoC may need a surprise play of its own because we're by no means out of the woods on inflation. It knows that rising price levels and a slowing economy can co-exist despite last quarter's negative GDP print. We've seen that odd couple before, back in the disco era of '76 to '82.

The BoC would rather play the Grinch who stole borrowers' paychecks than be accused of letting the inflation horse back out of the barn. That's why its communications have left the door open for an insurance hike, even amidst a waning economy.