Bank of Canada to remain on the sidelines for another couple of months - NBF

According to National Bank of Canada’s analysts, the no-change decision from the Bank of Canada was expected. They added that the central bank made clear that while the economy is operating near capacity, it is in no rush to move on rates.

Key Quotes:

“As widely expected, the Bank of Canada kept the overnight rate unchanged at 1.25% today. While Q4 Canadian GDP growth was generally softer than expected (due to surging imports), the BoC spinned this positively by highlighting the associated surge in business investment which “adds to the economy’s capacity”. The central bank hinted it will soon revise up its growth forecasts for the U.S. by saying tax cuts stateside will boost growth this year and next.”

“The no-change decision from the Bank of Canada was expected. The central bank made clear that while the economy is operating near capacity, it is in no rush to move on rates not only due to trade-related uncertainties but also because it will take time to assess the impact of B-20 on the housing market and the economy’s sensitivity to earlier rate hikes (the central bank says household credit has softened for three months in a row).”

“The upcoming Monetary Policy Report will likely show upgrades to the BoC’s U.S. growth forecasts, although it’s unclear if the central bank will also raise Canada’s outlook in light of recent developments related to U.S. trade policy.”

“All in all, we expect the BoC to remain on the sidelines for another couple of months, by which time there may be more clarity on trade, something that may allow the central bank to raise interest rates two more times later in the year.”