25 Feb 2015
Bank of Canada to wait-and-see - Nomura
FXStreet (Bali) - Charles St-Arnaud, US Economist at Nomura, notes that Tuesday's BOC Poloz comments on monetary policy suggest that rates are to be unchanged in March.
Key Quotes
"The statement makes it clear that the Bank of Canada does not believe that the economy urgently needs another rate cut. Moreover, as the last sentence states, adopting a more patient approach would allow the Bank of Canada to better evaluate the impact from the drop in oil on the economy and inflation."
"As such, a cut at the April meeting would be more natural as it coincides with the release of the Monetary Policy Report and an update to the economic outlook. In addition, Gov Poloz alluded to the increase in financial stability, especially household debt imbalances, as another reason
to be cautious on cutting rates further."
"Based on this, we now believe that the Bank of Canada will leave its policy rate unchanged at next week’s meeting. Nevertheless, we continue to believe that given the size of the negative shock on the economy, another rate cut will likely be needed."
"However, the timing of this cut will depend on incoming data, especially the price of oil, non-energy exports, signs that the weakness affects regions and sectors not linked to oil production and changes in household indebtedness."
Key Quotes
"The statement makes it clear that the Bank of Canada does not believe that the economy urgently needs another rate cut. Moreover, as the last sentence states, adopting a more patient approach would allow the Bank of Canada to better evaluate the impact from the drop in oil on the economy and inflation."
"As such, a cut at the April meeting would be more natural as it coincides with the release of the Monetary Policy Report and an update to the economic outlook. In addition, Gov Poloz alluded to the increase in financial stability, especially household debt imbalances, as another reason
to be cautious on cutting rates further."
"Based on this, we now believe that the Bank of Canada will leave its policy rate unchanged at next week’s meeting. Nevertheless, we continue to believe that given the size of the negative shock on the economy, another rate cut will likely be needed."
"However, the timing of this cut will depend on incoming data, especially the price of oil, non-energy exports, signs that the weakness affects regions and sectors not linked to oil production and changes in household indebtedness."