GLOBAL MACRO: "*USTR GREER: MY SENSE IS CANADA WANTS MORE CONCILIATORY [...]

• BOC SAYS OIL INFLATION SPREADING IS A SERIOUS RISK
• BOC SAYS SO FAR GASOLINE BUMPED UP INFLATION BY 0.4PP

Gov Macklem repeats his comment from previous meetings that monetary policy is facing a "dilemma": "you can't at the same time raise rates to lower inflation and lower rates to raise growth." But if the BOC's July MPR forecasts play out, "that dilemma will be resolving itself". He says the BOC will make decisions "one at a time" and he's "not going to handicap the next decision".

• On Canadian dollar weakness playing into rate decisions, Macklem says it "has depreciated about a couple of cents since the last decision... it's not been a major factor...you've seen some widening in government bond yields between Canada and the United States. I think that that's weighed a bit on the Canadian dollar."
• Asked by MNI's Greg Quinn whether enough time has passed by now since the MidEast conflict started in February to have more serious concerns about a flareup in inflation, Gov Macklem says that "I certainly cannot predict when it might get resolved, so there are certainly some risks there...the longer oil prices stay high, the bigger is the risk that that begins to spill over into the prices of other goods and services, and inflation starts to broaden, it becomes more generalized, and that would certainly be a warning sign to us....if that happens, we may well need to raise interest rates. That's not our base case, but it is a serious risk." He points out that core trim/median is close to 2% and headline CPI of 3.2% is highly concentrated in gasoline prices. 

• As we flagged above, sterling continues to shine during today’s session, and we have seen an extension of this firm rally going through in recent minutes. While the timing does line up with the WMR fixing window, the technical breaks of both 1.3452 for cable and 0.8500-0.8492 giving way in EURGBP likely exacerbating the pound’s advance.