A month after becoming the first developed market central bank to pause a tightening campaign since the onset of coordinated, global rate hikes to combat the pandemic-era inflation, the Bank of Canada held rates steady again.

I won’t spend an inordinate amount of time on non-Big 3 pauses going forward, but it’s worth staying apprised of incremental policy developments in Canada, Australia and New Zealand, even if “developments” just means updated forecasts and new statement language.

As a quick reminder, the BoC’s final hike in January was the eighth of the cycle, and brought the total amount of tightening in Canada to 425bps.

On Wednesday, the bank said that although inflation is easing “in many countries,” labor markets are still tight, and core price growth is suggestive of “persistent price pressures, especially for services.”

The BoC’s remarks came an hour and a half after an update on consumer prices from Canada’s southern neighbor showed core inflation running uncomfortably high across the world’s largest economy, even as the overall message from March’s US CPI report was relatively benign.

Tiff Macklem’s assessment of the Canadian economy (April’s statement was accompanied by a new monetary policy report) didn’t exactly scream “disinflation.”

“Demand is still exceeding supply and the labor market remains tight. Economic growth in the first quarter looks to be stronger than was projected in January, with a bounce in exports and solid consumption growth,” the BoC said. Although “acute labor shortages” are beginning to ease, the bank described wage growth as “still elevated relative to productivity growth.”

Inflation was running above 5% in Canada as of the latest update, although it’s well off the highs.

The BoC expects a “quick” drop to “around 3%” by mid-year. A return to 2% is achievable by the end of next year, the bank said, noting that although “recent data” points to additional declines in the near-term, the final push back to 2% is likely to be “more difficult.”

Why more difficult? Well, as the new statement explained, “because inflation expectations are coming down slowly, service price inflation and wage growth remain elevated and corporate pricing behavior has yet to normalize.”

If those factors sound familiar to you, that’s because the same dynamic is at work in the US. This isn’t as much a wage-price spiral as it is a profit-wage feedback loop. Corporates raised prices because they could, then workers demanded higher wages.

As in New Zealand, the housing market is a big piece of the puzzle in Canada. The BoC cited mortgage renewals at higher rates as one factor in the disinflation process, given the read-through for consumption.

GDP growth should be “weak through the remainder of this year before strengthening gradually next year,” the new statement said.

Overall, the BoC seems to think the odds of a soft landing are good. 1.4% growth this year and 1.3% in 2024 with inflation moderating to 3% near-term and to 2% over the medium-term would surely constitute a policy success.

The statement did note that the bank is “prepared to raise rate[s] further if needed.”