Markets Are Mispricing Bank of Canada Monetary Action, Says Rosenberg Research

10:21 AM EDT, 03/30/2026 (MT Newswires) -- The markets are mispricing the Bank of Canada's monetary action, said Rosenberg Research.

The futures market is pricing in two full BoC rate hikes and 30% for a third, noted Rosenberg Research. The timing for the first volley is July, as far as being over 50% odds, and 100% priced for September.

This doesn't make sense to Rosenberg, as it pointed out that an economy that has generated no economic growth in five months and no job growth in eight months hardly needs a steady diet of rate increases. Especially since households don't borrow at the 2.25% policy rate -- the average interest rate for them is 4.8% or 3.0% in real terms, which is up +40 basis points in the past three months and fully 70 basis points above the average for the past three decades.

Rosenberg kept in mind two other things: (i) headline inflation is 1.8% year over year and the core is 2.0%, and (ii) Governor Tiff Macklem at the most recent BoC policy meeting was far more balanced than what the markets have priced in -- stating for the record that he is going to look through the initial price shock.

In fact, he opened the door for rate cuts if there is no sign of any broadening out in the consumer price index and if the economy undercuts expectations.

Under the very hawkish BoC Governor John Crow in 1990-91, during Gulf War I, when the oil price more than doubled, he cut rates. That was with the headline inflation rate at the time approaching 7% year over year. Crow did that because the core rate of inflation was well contained and the unemployment rate was climbing, added Rosenberg.

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