The Bank of Canada has officially taken a pause. China’s inflation numbers are down sharply

The Bank of Canada left the interest rate unchanged at 4.5%. This was the first pause among major central banks. But the Bank of Canada reiterated its statement that it is willing to keep raising the interest rate if necessary to get back to its 2% target. But analysts believe this is just a formality, and officials have already hit the pause button for the rest of the year.

The increase in short-term rates in the US influenced the prospects of the European Central Bank. The swap market is showing more confidence (85%) in a 50 basis point rate hike in May, which would raise the deposit rate to 3.50%. Nomura raised its forecast for the ECB, predicting that the final rate will reach 4.25% — with changes of 50 basis points in March, May, and June, followed by a final quarter-point increase in July.

On Wednesday, crude oil prices fell for a second straight day, even as oil inventories fell. Inventories fell by 1.694 million barrels last week, the first weekly drop in inventories since December. The rise in the dollar index on the back of the US Federal Reserve’s aggressiveness outweighs the factors of falling inventories and rising demand from China.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) jumped by 0.48%, China’s FTSE China A50 (CHA50) fell by 0.80%, Hong Kong’s Hang Seng (HK50) ended the day down by 2.35%, India’s NIFTY 50 (IND50) gained 0.24%, and Australia’s S&P/ASX 200 (AU200) ended the day negative by 0.77%.

Japan’s economy is suffering from slowing demand overseas due to worsening global growth, leading to a record trade deficit and the largest output contraction in eight months in January. Japan reported a record trade deficit for January (~3.2 trillion yen, or ~$23.7 billion). Japan’s gross domestic product (GDP) increased by 0.1% year-over-year in the last quarter against a preliminary estimate of 0.6% growth and well below economists’ average forecast of 0.8% growth. In an effort to boost household purchasing power, the government and the Bank of Japan (BOJ) are urging firms to raise workers’ wages at the annual spring wage talks, which conclude this month.

China’s annualized consumer price index fell from 2.1% to 1%, well below the 1.9% forecast. The factory inflation fell to 1.4% on an annualized basis. The data show that despite a rebound in business activity, China’s economic recovery is still in its infancy as the country struggles to recover from three years of strict COVID-19 restrictions.