BoC to remain in pause mode until the second half of the year - NBF

The Bank of Canada (BoC) left the key interest rate unchanged at 1.75% at today’s meeting. National Bank of Canada’s analysts, Krishen Rangasamy and Paul-André Pinsonnault, expect the BoC to remain on hold until the second half of the year. 

Key Quotes:

“Explaining its decision to remain cautious, the BoC pointed to both international (US-China trade conflict) and domestic factors. It said that the oil price decline has “a material impact on the Canadian outlook”. The central bank expects a “temporary slowing in the fourth quarter of 2018 and the first quarter of 2019” that will open up the output gap.”

“The decision of when to resume policy normalization will be taken in light of upcoming data.”

“It may take 4 to 5 months before the Bank will have a better view and get confirmation from the data that policy is ready to move further towards neutral.”

“The Bank of Canada’s no-change decision was widely expected. The central bank had to be sensitive to the 2018Q4 commodity price collapse and opted to not tighten monetary policy further. The 2019 GDP growth downgrade was not surprising either in light of a lower-than-expected savings rate and declining terms of trade (both of which will limit consumption this year) and oil production cuts in Alberta (which will temporarily weigh on 2018Q4 and 2019Q1 GDP growth).”

“The BoC still says that the overnight rate will “need to rise over time into a neutral range”. But at this point, considering uncertainties with regards to the global economy and hence oil prices, as well as Governor Poloz’s comment in the press conference that it may take 4 to 5 months before the BoC gets a better picture of the underlying trend in the economy, we expect the central bank to remain in pause mode until the second half of the year.”

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.