The Bank of Canada has chosen to increase its policy rate to 4.75 percent, contrary to economists’ expectations. The market had predicted a 40-45 percent chance of a raise in the key rate, and while one-year rates remained stable after the announcement, ten-year yields rose around ten basis points. The market opinion of significant rate cuts may be shifting to just a few small hikes followed by a termination rate, causing bonds to appear less attractive. Despite inflation settling into the 4-5 percent range, the economy looks balanced, with Canadian GDP growth for the first quarter of 2023 surpassing expectations at 3.2 percent and a tight labor market. However, while some forecast a soft landing or boost in economic growth, others warn of a significant recession. The economic situation will become clearer after the Bank of Canada’s next meeting, and it will be a fascinating summer.