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The Bank of Canada today held its target for the overnight rate 25 basis points. BOC also kept its guidance and QE program unchanged at its current pace of at least $4 billion per week.
BOC also said that while policy settings were unchanged (rates, guidance, QE unchanged), the Bank upgraded its growth view for this year and predicted that inflation would firm up in 2021. The world that believes that quantity of money drives inflation, despite seeing none of it for decades as the money supply spike, sent the Loonie higher.
What the world can't figure out is why people hoard even as the money supply increases. Confidence is the key. If confidence about the future is deteriorating, people will not spend. If, however, they lose confidence in the government that issues the money, they will spend it today rather than save.
The government prints money, yet inflation won't turn up. The public and politicians are baffled by this outcome. It's the reason why Modern Monetary Theory - print away without consequences rose from the ashes of unlimited QE. It's only when confidence is broken that the velocity of money and inflation rises.
Market-driven money flow, trend, and intermarket analysis is provided by an Access Key.