Bank of Canada holds rates, less optimistic on economy

The Bank of Canada (BoC) released a slightly less optimistic statement today that gave greater weight to downside risks to the Canadian outlook and a less rapid rebound.

While the Bank’s assessment of risks to the inflation profile has not materially changed, the Governing Council did indicate that a number of complex adjustments to the list of risks were underway. We expect that the BoC will include (in July) a broader risk spectrum that will emphasize more prospective negative external influences (weak global demand, oil price volatility, geopolitics) and domestic uncertainties (household consumption), which were largely absent from the April policy round’s assessment.

As expected, the BoC left interest rates unchanged and continued to judge that the current degree of monetary policy stimulus remained appropriate.

The Bank’s views on Canadian inflation were also unchanged: total inflation remained low due to transitory effects of depressed energy prices, while the core remained above target in response to sector-specific factors and CAD weakness.

The central bank revisited aspects of its hawkish purview outlined at the April meeting.

The Governing Council retained its relatively upbeat outlook for the Canadian economy, which encompasses anticipation of a rebound fueled by US and domestic non-energy sector strength beginning in the second half of this year. The BoC also judged that Canadian consumption was fairing relatively well because of lower oil prices that boosted real gross domestic income. Markets will get a sense of whether the BoC’s assessment is correct with this Friday’s 1Q real GDP report

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Source:: Bank of Canada holds rates, less optimistic on economy

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