Stablecoins are US$500 billion risk to bank deposits: report

The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. The outlook for the global and Canadian economies is little changed relative to the projection in the October Monetary Policy Report (MPR). However, the outlook is vulnerable to unpredictable US trade policies and geopolitical risks. Economic growth in the United States continues to outpace expectations and is projected to remain solid, driven by AI-related investment and consumer spending. Tariffs are pushing up US inflation, although their effect is expected to fade gradually later this year. In the euro area, growth has been supported by activity in service sectors and will get additional support from fiscal policy. China’s GDP growth is expected to slow gradually, as weakening domestic demand offsets strength in exports. Overall, the Bank expects global growth to average about 3% over the projection horizon. Global financial conditions have remained accommodative overall. Recent weakness in the US dollar has pushed the Canadian dollar above 72 cents, roughly where it had been since the October MPR. Oil prices have been fluctuating in response to geopolitical events and, going forward, are assumed to be slightly below the levels in the October report. BOC: UNCERTAINTY IS HEIGHTENED AND WE ARE MONITORING RISKS CLOSELY; IF OUTLOOK CHANGES WE ARE PREPARED TO RESPOND - KEY SOURCE OF UNCERTAINTY IS REVIEW OF USMCA TRADE DEAL BOC: OUTLOOK HAS CHANGED LITTLE SINCE OCTOBER, BUT IT IS VULNERABLE TO UNPREDICTABLE U.S. TRADE POLICIES AND GEOPOLITICAL RISKS - SAYS IT EXPECTS INFLATION TO STAY CLOSE TO 2% TARGET OVER THE PROJECTION PERIOD BOC: U.S. GROWTH PROJECTED TO REMAIN SOLID, DRIVEN BY AI-RELATED INVESTMENT AND CONSUMER SPENDING - REITERATES THAT CURRENT RATE IS APPROPRIATE, CONDITIONAL WITH ECONOMY EVOLVING BROADLY IN LINE WITH FORECASTS BOC: EFFECTS OF TARIFFS ON U.S. INFLATION EXPECTED TO FADE GRADUALLY LATER THIS YEAR