At today’s Board meeting, the Bank of Canada (BoC) kept the key interest rate unchanged at 1.75% today. According to Krishen Rangasamy and Paul-André Pinsonnault, analysts at National Bank of Canada, point out that the statement was dovish as the central bank highlighted risks and downplayed the positive growth surprise of the second quarter.
“The no-change decision was largely expected. The tone of the statement, however, was dovish, with the BoC downplaying the Q2 upside surprise on GDP growth and emphasizing instead the escalating trade war and potential negative impacts on the Canadian economy.”
“The BoC’s updated projections will be available next month but in light of today’s message, one can expect a downgrade to the central bank’s growth forecasts particularly for 2020. Developments on the trade front (i.e. U.S.-China negotiations) will be crucial in determining what the central bank does next given the impact they will have of global and hence Canadian growth. If, as we expect, there are positive developments on the trade front, the BoC needs not alter its current policy stance.”
“The central bank may be forced to follow the Fed in easing policy significantly. Investors would be wise to watch the central bank’s future communications closely for clues about the BoC’s inclination on policy, starting tomorrow with Deputy Governor Lawrence Schembri’s presentation of an Economic Progress Report.”
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