BoC: Shift in bias – Westpac

Comments from Gov. Poloz and fellow BoC officials in advance of their pre-policy meeting (1 week) media blackout underscore their shift in bias and a likely removal of their oil-decline related cut two years ago, according to Tim Riddell, Research Analyst at Westpac.

Key Quotes

“Poloz has repeatedly stated that “low rates have done their job” and that he sees a rising trend in inflation into 1H 2018. The BoC also release its Monetary Policy Report with inflation and growth target updates.”

“The likelihood of a rate hike is around 90% priced in now. Critical would be any indication that they might swiftly unwind the full 50bps of cuts seen in 2015. Though Markit’s PMI (Ivey 7th) suggested a softening of conditions, oil price rises since mid-June should offset this and coming housing data could indicate that a broader recovery is developing.”

“The threat of Trump trade tariffs cannot be ignored into G-20, but the current sharp slide in USD/CAD could extend for a retest of May 2016 lows around 1.25.”