The Bank of Canada did what was expected of them – absolutely nothing. Today they held firm, and maintained their overnight rate at +1%, their corresponding bank rate at +1.25% and the deposit rate at +0.75%.
Canada’s inflation, similar to many other economies, remains low. The core-inflation rate is expected to stay well below the BoC target of +2% this year, mostly due to the on going economic slack. However, policy makers do anticipate inflation to rise in the coming few quarters on the back of a weaker CAD and higher consumer energy prices.
The BoC’s take on future growth seems relatively standard and in line with some of the G7 partners.
Global expansion is expected to strengthen over the next three-years.
Despite some recent softer readings in the US their recovery seems on track
Europe has its problems, growth remains moderate, inflation is relatively benign and geopolitical uncertainty surrounding Ukraine has yet to filter through
Chinese growth is to remain solid despite some financial vulnerabilities
Global growth remain largely unchanged from January’s MPR: 2014 +3.3% and 3.7% in 2015 and 2016
Canada’s growth to average about +2.5% for 2014 and 2015 and easing back to +2% in 2016
Policy makers expect a lower “loonie” should provide support for the export market
The BoC expects a rising global demand, fused with higher oil prices will stimulate business investment in Canada
Overall, the BoC still sees a gradual strengthening in Canada’s fundamentals directly effecting growth and inflation. This will obviously depend on the projected upturn in both exports and investment. The “as expected” release has the loonie ($1.1010) on the back foot after a bit of two-way action. There was nothing in the statement that alters the markets view that the BoC will begin its first rate move – a supposed hike – sometime in the next year.
MP