Nothing Untoward From The BoC

The Bank of Canada did what was expected of them – absolutely nothing. Today they held firm, and maintained their overnight rate at +1%, their corresponding bank rate at +1.25% and the deposit rate at +0.75%.

Canada’s inflation, similar to many other economies, remains low. The core-inflation rate is expected to stay well below the BoC target of +2% this year, mostly due to the on going economic slack. However, policy makers do anticipate inflation to rise in the coming few quarters on the back of a weaker CAD and higher consumer energy prices.

The BoC’s take on future growth seems relatively standard and in line with some of the G7 partners.

  • Global expansion is expected to strengthen over the next three-years.
  • Despite some recent softer readings in the US their recovery seems on track
  • Europe has its problems, growth remains moderate, inflation is relatively benign and geopolitical uncertainty surrounding Ukraine has yet to filter through
  • Chinese growth is to remain solid despite some financial vulnerabilities
  • Global growth remain largely unchanged from January’s MPR: 2014 +3.3% and 3.7% in 2015 and 2016
  • Canada’s growth to average about +2.5% for 2014 and 2015 and easing back to +2% in 2016
  • Policy makers expect a lower “loonie” should provide support for the export market
  • The BoC expects a rising global demand, fused with higher oil prices will stimulate business investment in Canada

Overall, the BoC still sees a gradual strengthening in Canada’s fundamentals directly effecting growth and inflation. This will obviously depend on the projected upturn in both exports and investment. The “as expected” release has the loonie ($1.1010) on the back foot after a bit of two-way action. There was nothing in the statement that alters the markets view that the BoC will begin its first rate move – a supposed hike – sometime in the next year.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell