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4 Mar 2015
BoC might keep policy steady - Rabobank
FXStreet (Barcelona) - Jane Foley, Senior Currency Strategist at Rabobank, believes that the BoC policy decision this afternoon is expected to bring confirmation of steady policy.
Key Quotes
“Just a few weeks ago the market was priced for a cut this month but this view changed on February 24 when BoC Governor Poloz reiterated that the BoC’s decision to lower the policy rate in January “was intended to take out some insurance” against the current risks to financial stability and inflation given that the oil-price shock was “an important setback in our progress toward full capacity, full employment and stable inflation because it is a net negative for economic growth”.”
“The BoC has already used the word ‘insurance’ in the statement that accompanied that surprise rate cut on January 21 and since then the oil price has moved off its lows and Canada has had the benefit of some better than expected economic data . The combination of these two factors suggesting that the need for another rate cut at this stage is indeed limited in our view.”
“Canadian January labour data produced an unexpected 35.4K gain in employment (albeit driven by part-time workers), manufacturing sales surged 1.7% m/m in December while Q4 GDP produced a better than expected annualised increase of 2.4%.”
“Meanwhile, core CPI inflation ticked higher to 2.2% y/y which is a significantly higher pace of price increases than in most other developed economies.”
“While the Canada economy will remain exposed to the impact of dropping oil investment for some months yet, these data have relieved some of the anxiety and uncertainties regarding the impact of the drop in oil prices on the Canadian economy.”
“While a steady BoC policy decision could provide support to the CAD today, given risk that both oil prices and the Canadian economy are still vulnerable we expect USD/CAD to remain close to current levels in the coming months.”
Key Quotes
“Just a few weeks ago the market was priced for a cut this month but this view changed on February 24 when BoC Governor Poloz reiterated that the BoC’s decision to lower the policy rate in January “was intended to take out some insurance” against the current risks to financial stability and inflation given that the oil-price shock was “an important setback in our progress toward full capacity, full employment and stable inflation because it is a net negative for economic growth”.”
“The BoC has already used the word ‘insurance’ in the statement that accompanied that surprise rate cut on January 21 and since then the oil price has moved off its lows and Canada has had the benefit of some better than expected economic data . The combination of these two factors suggesting that the need for another rate cut at this stage is indeed limited in our view.”
“Canadian January labour data produced an unexpected 35.4K gain in employment (albeit driven by part-time workers), manufacturing sales surged 1.7% m/m in December while Q4 GDP produced a better than expected annualised increase of 2.4%.”
“Meanwhile, core CPI inflation ticked higher to 2.2% y/y which is a significantly higher pace of price increases than in most other developed economies.”
“While the Canada economy will remain exposed to the impact of dropping oil investment for some months yet, these data have relieved some of the anxiety and uncertainties regarding the impact of the drop in oil prices on the Canadian economy.”
“While a steady BoC policy decision could provide support to the CAD today, given risk that both oil prices and the Canadian economy are still vulnerable we expect USD/CAD to remain close to current levels in the coming months.”