Bank of Canada to maintain a cautious tone next week – RBC

Next week the Bank of Canada (Boc) will meet. Analysts at RBC Capital Markets continue to think the BoC will remain an outsider by holding rates steady.

Key Quotes: 

“The Bank of Canada’s final rate decision of 2019 is the main event. While some 40 central banks having eased monetary policy this year, we continue to think the BoC will remain an outsider by holding rates steady next week. That view was cemented by today’s GDP report, which showed a 1.3% annualized increase in Q3 that was bang-on the BoC’s forecast from October.”

“The BoC is likely to continue to warn of the downside risks from trade tensions (their tone doesn’t swing around as much as market sentiment regarding a trade deal) but firmer capital spending suggests global concerns might not be as persistent a headwind to business investment as feared.”

“The Bank of Canada has emphasized that the health of the household sector will be key to upcoming rate decisions, and in that regard Q3 GDP didn’t raise any red flags.”

“While we expect next Friday’s employment report will be soft (look for election-related hiring in October to be retraced) we’d need a string of weak jobs numbers to become more worried about the household sector.”

“We look for the BoC to maintain a cautious tone next week, but with perhaps a less overtly dovish message than in October when Governor Poloz wasn’t shy about saying a rate cut was debated. Additional insight in that regard will come on Thursday when Deputy Governor Lane will deliver an economic progress report and take questions from the media.”