BoC: Heading back to neutral - AmpGFX
|Greg Gibbs, Analyst at Amplifying Global FX Capital, suggests that their view is that the evidence from the Canadian economy in recent months suggests that a gradual return to policy neutrality over the coming year is a reasonable base case forecast.
Key Quotes
“The Bank has estimated neutral policy rates to be between 2.5 and 3.5%. With rates at 1.25%, it has at least five 25bp hikes to get back to its neutrality estimate.”
“As such, it will still see that, after a hike this week, that policy is significantly accommodative, and project above-trend economic growth.”
“In the April MPR, the Bank assumed that there was some slack in the economy; but not much. It estimated that the output gap was between -0.75% and +0.25%.”
“While the unemployment rate is around a record low, the Bank thought there was still a bit of slack, and noted that wage growth was still somewhat below what it would normally be if there were no-slack.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.