Christian Lawrence, Senior Market Strategist at Rabobank, suggests that the Bank of Canada will announce its latest policy rate decision today and Rabobank expects no change to the 0.50% policy rate, a view which is in line with the Bloomberg consensus.
“Market pricing implies the same outcome with almost nothing priced into the front end of the Canadian curve in terms of cuts. Regular readers will be aware that not only do we expect the BoC to remain on hold at this meeting but also over the course of the next year.
Although the decision itself is likely to be a rather dull affair, the accompanying press conference with Governor Poloz and Deputy Governor Wilkins will be of interest. In addition, we will also see the fourth and final Monetary Policy Report (MPR) of the year.
So what is likely to change in the October MPR? Recent data and rhetoric from BoC officials points to the potential for a downward revision to the Bank’s growth forecasts but we would expect this to only be a minor – just 0.1-0.2ppt which would pull the BoC view in line with the consensus or ours. The same is true of the Bank’s inflation forecast with the risk to forecasts skewed to the downside. August’s core inflation print was the weakest in two years as it fell from 2.1% y/y in July to 1.8%. with food prices and ‘recreation, education and reading’ all weighing on price pressures while the headline was also impacted by falling transportation costs and lower energy prices with gasoline dropping 0.9% m/m.
In terms of CAD, oil still remains key although we have seen some decoupling in price action of late. The positive impact on the currency from the rise in oil prices has been more offset by weak data and the renewal of the USD bid tone. This in turn has seen USD/CAD fall back into the well-trodden 1.28-1.32 range.”