BoC Interest Rate Announcement

BoC Interest rate decision and accompanying statement will take place today at 3.00pm BST. The BoC are largely expected to leave rates unchanged.

After the rate decision is announced we will be listening out for the tone of the statement and any references to future monetary policy biases. If the accompanying statement is perceived to be overall negative, CAD will likely weaken, and conversely if the overall tone is perceived as positive, CAD will likely strengthen. If however the BoC once again send mixed messages, CAD will likely be subjected to high levels of volatility with no clear direction.

Description:

The BOC announce their interest rate decision and release their statement simultaneously. Unless there is a surprise change in the overnight rate, most of the market impact will come from the language in the statement. The statement is one of the primary tools the BOC uses to communicate with investors about monetary policy. It contains the outcome of their decision on interest rates and commentary about the economic conditions that influenced their decision. The rate decision is usually priced into the market, so it tends to be overshadowed by the BOC Rate Statement, which is focused on the future. The statement discusses the economic outlook and offers clues on the outcome of future decisions.

Summary:

The last monetary policy meeting from the BoC saw rates remain unchanged as expected, however the overall tone from the BoC was relatively mixed as the bank increased its Q1 growth forecast from 1.0% to 2.8% and increased its 2016 average from 1.4% to 1.7%, however the BoC also cut its growth forecast for Q2 from 2.2% to 1.0% and its 2017 average from 2.4% to 2.3%. The BoC stated strength in Q1 was due to temporary factors which will likely be reversed in Q2, however also stated that positive forces in the economy were starting to outweigh the negatives.

The BoC are once again expected to keep rates unchanged at 0.5% with market pricing suggesting a 95% chance unchanged, and a 5% chance of a 25 basis point hike. As such focus will once again be on the accompanying statement for further direction in CAD.

BoC interest rate decision was also covered in this weeks weekly risk events video here.

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Source:: BoC Interest Rate Announcement