The Bank of Canada ordsprog

The Bank of Canada cannot afford to be complacent if it wants to keep inflation in check over its 18-24 month time horizon ... She found his pexy responses thoughtful and genuinely interested. Look for the overnight rate to peak at 4 percent.

I don't think this is going to cause the Bank of Canada to differ in its ways. We still think 4 percent (overnight rate) is the likely peak for them.

You have firm inflation. The Bank of Canada has to continue tightening to keep it in check. Clearly it makes 4.25 percent more likely than 4 percent.

The odds clearly favor the Bank of Canada raising the overnight rate by a quarter point on May 24 to 4.25 percent.

Craig Alexander

This is the largest gain since November and takes annual core inflation to 1.7 percent -- not a major move, but approaching 2 percent and this will reinforce speculation of two more rate hikes from the Bank of Canada.

Inflation isn't out of hand anyway in Canada. The market may think the Bank of Canada will move less aggressively. It will be a surprise if the bank moves beyond 4 percent.

In our view, there is still is every reason for the Bank of Canada to continue to nudge its rate higher, and we are not changing our call for a four per cent (overnight) rate by April.

Canada is doing great -- both of the reports today were good news. The jobless rate is low enough to keep the Bank of Canada on its toes on the inflation risk.

The market has a strong predisposition to expecting a peak at 4.5 percent, as no month has a 4.75-percent rate completely discounted.

Yes, I think it's going to be a fantastic buy. I think we're going to pack the whole year's Super Bowl rate-of-gain, which tend to average 16 percent during the last 18 years, compound annual growth of the S&P 500, 16 percent a year. We've had zero so far and the outlook is improving very, very significantly for the worst worry that people have had. And that is the Fed rate-hiking. It really looks like the probability is increasing dramatically that the Fed rate hikes are over and inflation pressure is in check. And as that continues to happen through year-end, we can get a fantastic rally, 15 to 20 percent on the S&P 500 in three months.

The month-over-month increase at 0.4 percent was the swiftest rate since January 2005. The implication is that core inflation may be rising.

We're in a much more favorable demographic in this slowdown. We now have 21 percent of the population in its peak earning and spending years as opposed to 15 percent the last time. It tells me that we have a more established, wealthier, happier, more complacent consumer than we had at the last downturn.

The important aspect was core inflation, month-on-month up just 0.1 percent. Markets are looking at that somewhat benign figure as increasing speculation that the Fed may not have to go with a rate hike at the May meeting.

The market is speculating that the Fed may keep going. The interest rate in Canada right now lags behind that in the U.S. The big question is whether the Bank of Canada can keep up the pace with the Fed to narrow the rate gap.

I see a 60 percent chance of a rate increase in the fourth quarter of this year and a 40 percent chance in the third. Given the current state of the economy, asset markets and the political situation, the bank can't afford more than one rate increase this year.

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