The Bank of Canada maintained the interest rates unchanged today, despite many investors looking for a rate hike. The central bank stays dovish even though inflation runs at three-decade highs and the economy adds record jobs.

This week, one of the most-awaited events was the Bank of Canada’s interest rate decision. While the forecast was that the central bank would not raise the policy rate today, many traders expected it to do so for at least three reasons.

First, inflation in Canada is at levels not seen in three decades. With the price of oil knocking at the $100/barrel door (today, Brent oil traded at $90/barrel), the pressure on the prices of goods and services is likely to increase in the future.

Second, the Canadian economy recovered the lost jobs during the COVID-19 pandemic and some more. The jobs market is hot, and employment runs at record levels, further pressuring the prices of goods and services via wage growth.

Third, the COVID-19 restrictions are about to ease, starting with February. So what kept the Bank of Canada from hiking the rates? Here are three takeaways from today’s decision:

• Financial conditions remain broadly accommodative
• Geopolitical risks are on the rise
• Hawkish hold

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Financial conditions remain broadly accommodative

The Bank of Canada acknowledged that financial conditions remain broadly accommodative. However, it expects tightening in the near term, and it expects that monetary conditions will normalize sooner rather than later.

Geopolitical risks are on the rise

An interesting aspect of today’s decision came from the geopolitical side. The Bank of Canada sees geopolitical risks as a concern for the future and thus decided to keep its policy unchanged for now.

No hike but a hawkish hold

Despite not hiking, the Bank of Canada delivered a hawkish hold for several reasons. For example, it changed its wording on inflation – before today’s meeting, it viewed inflation as “elevated”, but now it is viewing it as “well above target”.

Or, in its forward guidance message today, there is no mention of economic “support” anymore. These are hawkish twists that almost warrant a rate hike at the next meeting. Should nothing material happen in the meantime to derail its plans, a rate hike in March looks like a done deal.